Holding Pattern
Trading Ideas
The Gold market fundamentals remain positive. The rise to record levels of ETF holdings of Gold and a simultaneous decline in Silver holdings could be a sign that investors may not be buying into the recovery. Some traders may wish to consider taking on a bullish position with prices being steady. Some traders may wish to buy the Feb Gold 1400 calls and sell the 1425 calls for a debit of 9.00, or $900. The trade risks the initial cost for a maximum gain of 16.00, or $1,600.
Fundamentals
Gold futures have been in a holding pattern since coming off all-time highs. Many traders have been taking profits ahead of year end, which has kept prices at bay. Outside markets have been just as choppy, and the indecision has spilled over to the precious metals market. The US Dollar Index has been trading sideways, and equities seem to have had their “Santa Rally” earlier this month. Gold fundamentals remain strong. Many traders remain uncertain as to the state of the global economic recovery, and the present state of the sovereign debt market has kept traders on edge. Investment in Gold ETFs remains as strong as ever, with assets at all-time record levels. Traders may have to wait until January, when the year-end machinations of the market subside, to get a clearer picture of where the Gold market may be heading in the intermediate-term.
Technical Notes
Turning to the chart, we see prices grinding it out between 1360 and 1400. Prices have been gravitating toward the 20-day moving average in recent sessions. So far, the market has held the 50-day moving average. A breakdown below the average could signal a negative turn in the market. The RSI indicator is diverging from the price, which hints at possible weakness in the near-term.
Rob Kurzatkowski, Senior Commodity Analyst
