Three Reasons Gold Failed at Record HighsGold (December) / Silver (September)
Gold, last week’s close: Settled at 2427.9, up 28.0 on Friday and down 18.9 on the week
Silver, last week’s close: Settled at 28.02, up 0.045 on Friday and down 1.279 on the week
Gold and Silver futures are working back from last week’s beatdown. We believe the continued weakness is a near-term phenomenon and the result of three factors. Weakness is closely correlated to volatility associated with an unwind of the Japanese Yen carry trade. Also, the communist party of China prioritized quality growth over stimulated growth. With China’s economic growth trajectory deteriorating, the country is essentially exporting deflation. Lastly, speculative positioning in Gold became overzealous and a move off record highs created a liquidation event.
December Gold futures are now front month, and strength overnight tested major three-star resistance, aligning with a .382 retracement from last week’s low back to the prior week’s all-time high at 2451.5. We will be looking for balance at 2436.7 in order to hold a constructive session. Silver certainly lagged in its strength Sunday night and continues to struggle against key resistance at 28.28-28.34.
Bias: Neutral/Bullish
Resistance: 2451.5***, 2464-2468***
Pivot: 2436.7
Support: 2427.9-2430.5***
Silver (Sept)
Resistance: 28.28-28.34**, 28.90-29.06****
Pivot: 28.10
Support: 28.04**, 27.91-27.95**, 27.75**, 27.54**, 27.33-27.40**, 26.61-26.98****
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