The DeCarley Perspective Trading Newsletter

Bullish Seasonals in Gold, Moment of truth

Commodity Fundamental, Technical and Seasonal Analysis

*All rights reserved!  Redistribution of this publication is strictly prohibited.

****There is substantial risk of loss in trading futures and options.**

****Past performance is not indicative of future results**

This newsletter was emailed to clients on August 2nd 2013

On the radar:

  • Gold has recovered significantly from the June lows; there is technical resistance looming but a break-out could be swift.

Seasonals are bullish, will we get the technical break-out?

Gold Futures Technical and Seasonal Analysis

Precious metals tend to be a consistent victim of band wagon trading. In recent years gold has gone from a boisterous bull market in which “everyone” (even the cab drivers and city tour bus operators) were scrambling to buy, to an environment in which speculators of all types and sizes were dumping their holdings with little regard to price.  In such a feast or famine market, being nimble is a must; hopefully this chart work will help in navigating the metals arena.

There is no doubt that gold is a volatile market; accordingly, it should be treated as a trade rather than an investment.  We aren’t big fans of the doomsayer mentality that suggests we should all be holding hard assets in anticipation of a collapse of the fiat money system. Nonetheless, the market moves and can be an attractive place for risk thirsty speculators. 

Gold has made a miraculous recovery from the June lows (a time in which most were calling for sub $1,000 gold).  We continue to feel as though the path of least resistance in gold will be higher simply because the asset is priced on perception, and we believe investors will begin focusing on inflation and safety.  With that said, markets never go straight up or straight down so technical analysis can be handy.

In our view, gold prices have formed a consolidation wedge in which a break-out is inevitable.  Unfortunately, there is no way to know for certain the direction but we suspect it will be to the upside.  Specifically, the December gold futures contract faces resistance near $1,330; in our opinion the odds favor a break-through of this price which would likely lead to follow through buying into the $1,400 area.  Supporting our theory are bullish seasonals that run through October and what appears to be the beginning of another leg lower in the U.S. dollar (see chart).  If we are wrong about the initial direction, a break below the $1,285 area might trigger liquidation into the $1,240 price but we have to feel like this would be an opportunity for the bulls.

U.S. Dollar Index Futures Technical Analysis

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 Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data.

**Seasonality is already factored into current prices, any references to such does not indicate future market action.

**There is substantial risk of loss in trading futures and options.**


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