Last week

Gold closed below its October mid-point level, but gained 2.4% net for the month. On a weekly basis, GOLD actually lost almost 2% last week in a reaction to poor economic data and the Fed’s hawkish statement on Wednesday about a possible rate hike in December. In effect the Fed successfully talked gold down.

Trading results

Nat’s support/resistance areas, as outlined in the Gold trading plan posted last weekend, pretty much identified the range for the week. But the sudden sharp move Wednesday  — a $28 decline in 30 minutes after the Fed statement — was difficult to trade unless you were actively monitoring the market in real time.

End-of-day or swing traders had a good entry when the price moved above the weekly pivot, and a good exit at the first resistance level for a $9 gain — more if you were using a trailing stop for the exit.

But the best trade of the week was available to our active traders, who had two entries and two well-defined exits on the sudden sell-off Wednesday.

Here’s the annotated intraday chart for the week. 60-minute bars.

This week

Third quarter GDP missed expectations, reflecting existing growth risk. Employment cost index and personal income all missed their numbers. Those numbers are unlikely to improve over the next 7-weeks going into the December FOMC meeting.

The drop in GOLD price last week was a short-term retracement due to overbought condition, using the prospect of a rate hike as an excuse. We think it was only an excuse. At this point it is difficult to imagine a scenario that would induce the Fed to tighten monetary policy.

If they do hike in December, essentially to prove they still can, expect a “one and done” symbolic rate increase. Interest rates will not be “normalized” any time soon.

Member content

Download the full trading plan here: 151103-gold-plan

GOLD had already had 11 days on the downside after it made a high at 1191 on Oct. 15. The short-term indicators are moving into oversold territory, but are not extremely oversold. Intermediate-term indicators remain in overbought territory.

This week GOLD could have some ultra-short-term bounce, but it shouldn’t change the short-term downtrend direction.The 1168-1175 zone will be first major resistance zone to prevent the price from popping. Below the current price, the 1129-27 zone will be the first support zone. A break below 1123 level will be bearish. If it breaks, a further decline to test the major support around 1110-08 should be expected.

Once intermediate-term indicators move into oversold territory, we should see a decent rally again.

LONG-TERM SUPPORT at 1007.7-1033.90 – Yearly breakout level from Year 2008- 2009
LONG TERM Trend line SUPPORT at 1009.50 this week.
INTERMEDIATE TERM SUPPORT at 1045-1035 zone
SHORT-TERM SUPPORT at 1072-1095 zone.