Gold swing trades, week of Aug. 22, 2016

Last week

160819-gold prices

Gold futures prices, week ending Aug. 19, 2016

GOLD went sideways and consolidated in response to the usual mixed messages from the Fed about the timing of the next rate hike, if any.

Last week’s trades

160819-gold 60a

Gold futures, Aug. 19, 2016. 60-minute bars

For gold traders the most important event last week was the surge that accompanied the release of the Fed Open Market Committee minutes on Wednesday (08/17) afternoon.

However that wasn’t the best trading opportunity of the week, In fact it disrupted profitable trading for many participants.

Nat’s calls in last week’s Gold plan produced two well-defined trades — long at the pivot, short at Nat’s 1st sell level — worth a total of $2,600 per contract in the first two days of the week.

But people preparing to go long at the pivot a second time coming into the FOMC minutes would probably get stopped out by the enormous volatility that moved the price through about $19 on heavy volume in 15 minutes (see chart).

If you were monitoring the market in real time you had lots of opportunity to get long at the pivot again when the frenzy stopped; failing that there was another opportunity to short Nat’s sell level later in the day.

The profit for the week was roughly $2,600 to $5,000 per contract depending on which trades you took. But it is an illustration of the way computer-based algos are able to manipulate the price when potentially-important events are scheduled in advance.

There is another such event scheduled this week.

This week

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160819-gold weekly

Gold futures Aug. 19, 2016. Weekly chart.

Mrs. Yellen will speak at Jackson Hole on August 26. Her speech may or may not give a clear picture of the Fed’s direction and intentions, but in either case GOLD may react strongly, especially if there is some suggestion of a rate increase in September. Another opportunity to push the price around.

Raising the interest rate will not be good for GOLD. But mixed messaging and planned incoherence could be Fed’s the communication strategy, which will help GOLD to hold up above the $1300 level.

This week $1357.50-$1356.50 is a major key zone. Remaining below it suggests that the bearish symmetrical pattern hasn’t completed yet.

If there is a sell-off and Gold falls below that key level, there is still support around $1335. If that level fails, the downside target is still at $1323.60-$1328.
A major support zone at $1310-08.50 will try to hold GOLD price up the first time it is visited.

If the weekly price closes under $1330 it will give a short-term bearish outlook, and a further downside move should be expected.

My choice this week is to focus on the short side.

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