Gold prices declined close to 40% from their highs around September 2011.
The tail end of QE made deflationary fears the major factor in this slide, as well as the somewhat historical inverse correlation to stock market prices. The latter is the one responsible for the major rally this morning ( Dec. 9th, 2014) with gold up $32 and silver up almost a full $1!! This is a big move in the metals complex.
From a technical perspective, gold is getting comfortable in its new "value", which the market perceives to be around 1130 to 1340. This is a wide enough range for most traders to get in trouble or benefit from price fluctuations as this translates to $20,000 in one futures contract move of the range.
Weekly chart below shows the market respected some oversold indicators I use ( blue diamond, free trail available here ) attempting to reach the next Fibonacci extension at 1260.
GCE Gold (Globex) Weekly Continuation
From the longer term perspective, I don't think the slide in gold prices is over but from the shorter-medium term time frames I feel the pressure is upward and any additional weakness in global stock indices can push this market back towards the 1288 level.
One can look to use outright futures along with possible options protection, one may look to see if there is a certain view he or she has in regards to the gold - silver ratio, and last but not least one can use options combinations.
Many ways to trade any market, many ways to lose money in any market and only very few ways to lock in gains - this one is not different. If you need help creating a trading plan, visit our broker assist services.
Disclaimer - Trading Futures, Options on Futures, and retail off-Exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.
About Ilan Levy-Mayer
Ilan Levy-Mayer has been a commodities broker for over 16 years, and holds an MBA in Finance and Marketing from the Hebrew University in Jerusalem. Ilan is currently the vice president and a senior futures broker overseeing Online Future Trading Platforms and Commodity Futures Trading systems at Cannon Trading Company.
