Marex Spectron Bullion Thoughts

After a couple of weeks of excitement, gold seems to have paused for a breather and a realistic look at whether it should be up here or not. Friday was overdone and weak longs bailed out as the price dropped back to where it had started first thing. I am afraid that once again we saw the usual suspects getting bullish at the upper end of the range and the momentum traders piling in as new highs were made. In the usual formulaic fashion, the banks queued up to tell us that gold was at the beginning of a new bull run and various fund managers who probably should know better by now started extolling the virtues of the yellow metal. Where exactly the aforementioned market commentators were when gold was at 1270 two weeks ago is anyone’s guess.

Basically the gold market continues as it always has. Reacting late to geopolitical tensions and actually moving on rate cut talk. Whilst many people like to still link gold to upward moves in times of trouble, the mere fact that it dropped twenty dollars on the same day the US accused Iran of attacking two tankers in the Gulf, tells you just how well that link actually works. It is an old story within this market of waiting for moves, before trying to find reasons for them. The simplistic answer is that the Fed started becoming slightly dovish about two weeks ago and that, coupled with some negative figures at that time, has given rise to gold’s upward trajectory. It is all about the dollar and the Fed, unless something seriously awful happens in the world (God forbid.)

So, where to now? I personally think we have done enough on the upside and with the Fed meeting on Wednesday, we will wait for their post meeting announcement for views and clues (they will not cut or raise rates.) The market is still long and it wouldn’t surprise me to see some more longs getting out ahead of this, so a move down towards 1325 could be on the cards over the next day or two. I am not overly bearish, but as I have said time and time again, when gold looks great it’s time to sell and vice versa. Momentum works up to a point, but you need to be prepared to trade short term, not long. Obviously one must always keep an eye on headlines for those kneejerk reactions to various tweets and speeches, but overall watch the economic progress and results of the US, this is the prime mover for gold and will continue to be for a while to come.

If you have any questions about any of the above, or just want more information about the bullion market, please feel free to contact me at anytime.