IAUM - Gold Prices Experience Retreat After Failed $2000 Breakout

2023-11-13 07:48:15 ET

Summary

• Gold prices retreated from the $2,000 per ounce threshold due to a lack of market-moving events.
• Traders and investors locked in profits and exited long positions, resulting in a net selling trend.
• Gold prices faced significant declines, shedding around $20 per ounce, and closed the week around $1,935 per ounce.

Fundamentals

Gold prices experienced a noticeable retreat on Friday, erasing a substantial portion of the recent gains. Last week marked a shift from the preceding weeks when gold prices flirted with the significant $2,000 per ounce threshold but failed to establish a solid foothold above it.

The decline in gold prices throughout the week was not driven by specific negative factors but rather by a lack of substantial market-moving events. The absence of impactful macroeconomic data and a relatively quiet political landscape in the United States contributed to this inert market environment. Consequently, some traders and investors chose to lock in profits and exit long positions, resulting in a net selling trend that pushed gold spot prices down to $1,970 per ounce by the end of Monday (Nov. 6).

While the pace of gold's decline slowed on Tuesday and Wednesday, it was evident that the market was disappointed by the metal's inability to decisively breach the $2,000 per ounce mark or sustain most of the multi-week rally without fresh catalysts. Although spot prices stabilized above $1,950 during these two trading sessions, there was a palpable resistance to significant rallies until Thursday morning.

Thursday stood out as an unusual trading day, characterized by the adage of "buy the rumor, sell the news." Gold prices experienced a strong morning rally when New York markets opened for cash trading. Market sentiment was optimistic, with expectations that Fed Chair Powell's afternoon remarks would echo the somewhat dovish tones from the previous week's Fed meeting and signal the conclusion of the interest rate hike cycle. Gold surged to $1,965 per ounce before lunchtime. However, Powell adopted a more hawkish stance during his afternoon speech, expressing doubts about the central bank's ability to achieve its 2% inflation target. This shift in sentiment disappointed investors and traders who had positioned themselves optimistically earlier in the day. By the close of the New York market, gold spot prices had retreated to approximately $1,955.

On Friday, gold experienced a significant downward slide, particularly in comparison to other major FOMC-sensitive asset classes. Despite the positive performance of US stocks at the week's end, gold prices faced substantial declines, shedding around $20 per ounce. These declines were exacerbated by additional hawkish comments from San Francisco Fed President Mary Daly and a relatively subdued market due to the Veteran's Day holiday in the US.

As the week came to a close, gold spot prices hovered around $1,935 per ounce. The direction of the gold market in the upcoming week may be influenced by how much further prices need to adjust before the week's end. Additionally, a pivotal update on consumer inflation data scheduled for Tuesday morning is anticipated to provide insights into the market's direction.

Let's take a look at the weekly standard deviation report and see what short-term opportunities we can identify for this week.

Gold: Weekly Standard Deviation Report

Nov. 11, 2023 12:59 PM ET

Summary

• Gold futures concluded the week at $1938, confirming a bearish trend below the 9-day SMA.
• A close above the 9 SMA could negate the bearish trend and shift it to a more neutral state.
• The market's closure below the VC PMI at $1958 confirms the bearish price momentum, but a close above it could change the trend.

Weekly Trend Momentum Analysis:

I am pleased to present an analysis of the weekly trend momentum for gold futures. The gold futures contract concluded the week at a price point of $1938. It is crucial to note that this closing price resides below the 9-day Simple Moving Average ((SMA)) at $1942, thus confirming the presence of a bearish trend momentum at the weekly level.

It is pertinent to acknowledge the potential for a trend reversal. In the event of a close above the 9 SMA, the current weekly bearish short-term trend would be negated, shifting it to a more neutral state.

Weekly Price Momentum Analysis:

In addition to the trend analysis, a comprehensive examination of the weekly price momentum is imperative. The market's closure below the VC Weekly Price Momentum Indicator (VC PMI) at $1958 serves as clear confirmation of the bearish price momentum prevailing during the week.

Nevertheless, it is essential to emphasize that a close above the VC PMI has the potential to alter the course of the weekly bearish short-term trend, transforming it into a more neutral trajectory.

Formal Cycle and Strategy:

Lastly, with regard to the market cycle, the forthcoming cycle due date is scheduled for 11/15/23. For those currently maintaining short positions, a prudent strategy may involve considering profit-taking within the price range of $1916 - 1895.

We strongly advise vigilant monitoring of these key indicators and dates in order to make well-informed trading decisions.

Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed herein constitutes a solicitation of the purchase or sale of any futures or options contracts. It is for educational purposes only.

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