CHART VIEW - GOLD FUTURES BY JEFF GILFILLAN
It’s the day after St. Pat’s, and each day has become its own animal. The best technical analysis is backed by data from all types of traders providing liquidity and price discovery required to reach a fair price by the end of the day, week, month, etc. During periods of extreme volatility and uncertainty, the charts not only see wild swings but even become fundamentally displaced—at least temporarily—for many reasons, including many trader types shutting down their books/machines. There are many futures contracts much more vulnerable to displacement than others, but the underlying reasons are generally tied to either an over-weighted market, i.e. equities/ETFs (news flash), or lack of participation among key buyers/sellers (cattle).
This post is focused on gold futures, which brought huge volatility but have a large enough base of diversified participants for a strong, competitive market (at least for now). I’d probably lose if I tried to fight the paper vs. physical argument given all the paper based on paper based on paper contracts, but in my lifetime I have seen enough futures delivered into physical that I am comfortable with the gold futures we offer. It’s also more liquid and more competitively priced to trade on paper with a central order book and extremely low counter party risk.
The last handful of chart views focused on gold futures breaking out of a long-term channel last year (June) and the following choppiness and low value zones the market needed to transition through to establish new value zones. Been there, did that. After the market reached the top end of the transitional zone at 1530 in August 2019 and then some through September, it traded through a 3-month rinse cycle until a strong monthly close in December provided enough technical strength to encourage new momentum buying in January.
As we know, COVID-19 spreading outside of China in force caused great market volatility, and this has continued through this writing. Gold futures spent February and March testing just below ½ way point (1720) of the 2011 – 2013 gold move that hit all-time futures high at 1911.60.
The CME GC Globex gold futures hit a high of 1701.60 on March 9th and sold off. Recent support is at 1450, which is a 12-month moving average and the 38% retracement level on a weekly chart going back to 2015. The next level of long-term technical support is 1375, which is the high from 2016 to 2018 and a 50% retracement on weekly chart going back to 2015. Value support is just above 1300.
On a technical level, it’s difficult to have a strong bias when this month we broke both the 6-month high and 6-month low and we’re only halfway through March. The path of least resistance appears to be in a liquidation style move lower towards LT value areas. The best advice I have is to use prudent risk management and be as under-leveraged as possible. See my notes on micros below.
If you like volatility, you are in the right market. If futures is a suitable endeavor for you, consider the wide variety of mini and micro contracts to help reduce your leverage and increase your flexibility whether you are speculating or hedging.
Be patient as a spec and liquid as a hedger.
Trade Gold Futures Globally with Phillip Capital.
The bulk of our US FCM’s gold futures volume is through the CME Group. We are a full clearing member of the CME Group. Our US FCM and affiliates of Phillip Capital Group also offer traders access via memberships to other global exchanges offering gold futures including TOCOM, SGX, DGCX, ICE and HKEX.
CME Group – CME Gold Futures Continuation Weekly
Chart – Track N’Trade
Futures trading is not for everyone. The risk of loss in trading can be substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.
CME Group – CME Gold Futures Continuation Monthly
Chart – Track N’Trade
Futures trading is not for everyone. The risk of loss in trading can be substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.
Source: CME Group – Commitment of Traders powered by QuikStrike
Trading in futures products entails significant risks of loss which must be understood prior to trading and may not be appropriate for all investors. Past performance of actual trades or strategies cited herein is not necessarily indicative of future performance. The information contained herein is provided to you for information only and believed to be drawn from reliable sources but cannot be guaranteed; Phillip Capital Inc. assumes no responsibility for errors or omissions. The views and opinions expressed in this letter are those of the author and do not reflect the views of Phillip Capital Inc. or its staff.