Gold swing trades – week of Aug. 29, 2016

Last week

160826-gold prices

Gold prices, week ending Aug. 26, 2016.

GOLD bounced around last week as it struggled to decipher Fed Chair Janet Yellen’s cryptic message from the Jackson Hole conference.

The yellow metal dropped $27 in the early part of the week, then rose almost to the weekly high in the first 15 minutes of her speech.

But it was all fake. The price dropped back and closed near the low for the week. At the end it lost $20.30, a net weekly loss of about 1.5%.

Last week’s trades

160826-gold 60a

Gold futures, Aug. 26, 2016. 60-minute bars.

The trading was a bit trickier this week. The markets were waiting for some kind of definitive pronouncement from the Fed Reserve on interest rates (they got the usual planned incoherence instead) so trading before Yellen’s speech Friday was muted, but gradually drifting lower.

The entry price never reached Nat’s keyline, and stopped $1.20 below the pivot, so some traders missed the entry on Tuesday.

Too bad for them, because the subsequent move down to Nat’s 1st buy level was worth about $24, or $2,400 per contract.

A smaller number of traders took the second trade, a buy once the price moved back above Nat’s buy level on Friday prior to the Fed pronouncements.

That move was worth about $20, or another $2,000 per contract, but you had to be monitoring the price in real time to get out on the big spike up.

Some of Nat’s Full Access members got that move or part of it, but it required quick reactions, and most end-of-day traders would have missed it.

This week

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160826-gold weekly

Gold futures, Aug. 26, 2016. Weekly chart.

Mrs. Yellen’s speech sent a clear signal that the Fed can see – or at least is willing to talk about – an interest rate increase at some point in the future. What they don’t say is when this might happen.

One sentience shows the Fed may raise interest rates soon, the next says that more QE may be needed. This kind of dual language has been used for the past 5 years. It is no surprise that it generates choppy movements in gold.

During the weekend, investors are likely to digest the speech statement and statements from other Fed officials (which are often contradictory) concerning interest rates.

However as traders we still focus on price action. This week $1321-$1323.50 is a major key zone. Remaining above it could lead GOLD price to move back near last Friday’s high area for testing.

A break below $1320 level could run some stops and push GOLD down to $1305-$1310 zone to challenge the $1300 psychological support.

The daily PMI indicator keeps moving down, approaching oversold territory. Longer-term indicators still have an overbought condition.

A brief bounce could be seen. But we expect the bounce will not last very long. There is a potential neckline of a double top pattern at the 1310-08 zone. A failure to hold up this neckline zone will be bearish.

It could open the door to a short-term correction to the $1220 level. But long before a breakdown, the $1335.50-37.50 zone needs to hold GOLD down and prevent it from rallying.