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I find the most interesting gold chart right now being the Gold Volatility Index. Volatility has been well below average for nearly 2 years. Single digit readings were seen in both 2017 & 2018. The decline in gold which started this spring had volatility declining with it. Option trading in gold was anything but easy, as option traders like volatility. Recently though, the Index has advanced. A move from 11 to 13 may only be 2 points, however, an increase of 18% is welcomed when trading options.
Even with the low level of volatility, I consider the price movement of gold to be volatile this summer. Gold took investors on quite the ride -six straight months of declines and a drop of nearly 15% (200 points) until its bottom on August 16th. Every week gold became more and more technically oversold and a bounce was imminent. The blog post from Aug. 13th stated:
Only time will tell if higher prices transpire, but once you add the latest Commitment of Traders report having the gold speculative short positions as the biggest in history (can you say short squeeze?) and all of the above having favorable aspects for gold to appreciate, I would not be surprised to see gold prices considerably higher in the near future.
Gold made its low 3 days later and reversed about 4 ½% over the next 2 weeks. It was range bound until a large advance on Oct. 11th, but again seems to be settling into a trading range.
Dissecting the daily price chart a little further shows:
- The recent low was at a Fibonacci support level.
- Price has held a diagonal support trend-line which it has not closed below.
- Slow Stochastics is still in the oversold territory, however, turning upward.
The weekly chart shows indecision and range trading. The Money Flow Index (MFI) is mid-range at 57, not giving much guidance, MACD is near mid-range, and volume has slightly declined.
Consolidating an overall view of the charts, without oscillators giving much indication, the price range between 1200 & 1240 appears to be the main guide. If support near 1200 breaks, then reevaluating the charts is in order, knowing that the next significant level is the low on Aug 16th at 1167. I would consider closing above 1245 to be significant. Trading gold in November and December can be difficult. Next month is the FOMC meeting (gold has declined into those events in the past) and it’s not uncommon to see lows put in place in December before quick advancements. If trading, watching the trend-lines closely could prove greatly beneficial.
The post Gold – The Waiting Game appeared first on Catalyst Hedged Commodity Strategy Fund Blog.
