The recent trade in the Gold market has been very technical and cautious. It has been trading between resistance and support levels for most of the last two weeks. The volume has been down and as a former floor trader I understand markets go through cycles. Trading volume shifts from one market to the next as capital seeks performance.
The gold market is seeking guidance and direction these days. It feels to me that much of the monies that were in the Gold market in January are now in the equities, energies, & other commodities such as the agricultural markets. We gold traders still have the late February to early March avalanche fresh in our minds. As you will recall gold broke from the $700.00 level down to the $640.00 area. This certainly did not help public investors’ confidence, nor the long traders’ pocket books.
It is my opinion the public investors are reevaluating their convictions that gold may go higher, and they are still shaking off their bad experience if they were positioned on the long side of the market just before it took this tumble. As a long time floor trader I truly understand what a bad trade will do to your confidence. The fact of the matter is markets will correct, retrace, and rebound whether you’re in the market or not. A $60.00 move over a two week period is a big deal, but looking at the big picture a $60.00 move in the Gold market is certainly not a catastrophe considering the typical daily trading range can easily be $10.00.
Putting it in perspective, I remember trading in the Gold pit in 1979 when there were literally $60.00 to $100.00 ranges in a single trading session. The object is to stay within your equity and trading guidelines. If you have an opinion, even if the opinion is neutral, there are trading plans and strategies to fit your risk tolerance.
Thursday’s trade June 7th is an indication of what a little news can do to the Gold market. Despite reports that South Africa has cut it’s Gold production the Gold community traded off am AP report stating
“ rumors the Fed is expected to be less inclined to cut rates “ gave strength to a weakened Dollar causing it to rally 40+ points. The rally in the U.S. Dollar caused the Gold to close $9.40 lower on the day. This is proof positive the professional traders are desperate for news in order to gage a direction.
My opinion is that the Gold market is waiting for a reason to rally. Perhaps the support will come from a retest of the US Dollar lows made back in late April, perhaps a new source of geopolitical tensions, or perhaps an event-driven upward force that would drive energy prices higher and regain the public and professional traders’ confidence to bid the market higher.
The best advice I could give traders of all experiences “The Market is Always Right”
Manduca Trading LLC.
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