June Gold settles 1254.8 down $17.90 for the week of May 20, 2016
Despite a washouton Thursday, Gold was able to settle considerably above the weekly lows and above the 1250.0 level. New York Fed President Dudley was quoted Thursday that the markets were underestimating the possibility of rate hikes in the future. His comments followed Wednesday’s FOMC minutes release that revealed that most Fed members felt that a rate increase be appropriate next month. Despite the sell-off, both Gold and Silver seemed to absorb the news halting any further declines to end the week. Clearly the Fed is starting to get what it hoped for and that is a more inflationary environment where inflation gauges have slowly crept up to the level where rate hikes may be necessary. The commentary spurred a bullish reaction in the Dollar this week which hurt the commodity sector as a whole and could continue to do so. Gold demand in Asia declined off of a stronger Dollar this week. However the world’s gold backed exchange-traded fund, the SPDR Gold Shares (NYSE:GLD) rose by 4.5 tonnes Thursday to their highest level since November 2013.
From the December 2015 lows to this month’s highs, Gold has rallied $250.00 and ounce. Coming into the week the non-commercial and non-reportable net long position came in at a whopping 314,290 contracts. For Silver non-commercials came in a record long 80,275 contracts. Clearly they have taken some of these off the table with the drop in futures prices this week, but the bounce from the Thursday low to Friday’s settlement tells me a little bargain hunting occurred. The MACD though has moved into negative territory indicating a loss of momentum. With option expiration in the June Contract on the 25, I look for those long calls to book profits in the futures market to begin the week. The market will also be watching Janet Yellen’s panel discussion on the economy in Massachusetts next Friday morning. Also the PCE Price index release on May 31, which is the Fed’s preferred inflation gauge will be paramount as well. Look for the Gold market to test this week’s lows early next week. If surpassed I look for Gold to quickly test 1236.2 and then 1228.0. The longs have the profit and therefore the risk. If those downside levels are achieved, I would then look to buy calls in December or vertical call spreads.
Weekly Swing #s GCM 16 for the week of May 23 through May 27
Resistance#2- 1301.9
Resistance#1-1282.0
Pivot-1263.3
Support#1-1236.6
Support#2-1217.5