December gold went and kissed our key support level we highlight last week at $1255 before bouncing sharply over the last several days on the North Korea situation. It is important for traders to keep in mind that these “situations” are rarely a sustainable game changer for the markets. This is something the bull camp should be extremely mindful of. Any time the precious metals catch what is perceived to be a “flight to quality” bid, the market almost always punishes those who chase the conventional wisdom trade. Perhaps this time is different. In any instance the escalation of tensions surrounding this situation can’t be ignored and traders should consider strategies accordingly.
Chart from QST
From a technical standpoint there is clear cut resistance at $1300-1305, the old April/June double top level. A convincing close above this level is needed to ignite further rallies. From our perspective gold has an overwhelmingly strong feel to it, a bullish feel which has been absent for longer than we can remember, and for whatever reason seems to be flying under the radar and not garnering the attention it normally does. This is a recipe the bulls want to see. Again, the major concern for fresh longs should be gold’s history of dishing out severe punishment to the obvious (or oblivious in this case) flight to quality seekers. In general, volatility is still relatively low and the market does not seem to be pricing in the degree of fear one might expect based on option pricing.
My many years of trading futures markets does make a difference. Feel free to call or email me if you have any questions or would like to open an account.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The risk of loss in trading futures and options can be substantial. Past results are not indicative of future results or performance. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff. Research analyst does not currently maintain positions in the commodities specified within this report. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
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