What To Do Now In Gold Futures

Over the past few weeks I’ve had a number of people ask me for my outlook for the gold futures market.  Given today’s beat down, I thought I’d give it a quick write up.

The daily chart for August gold futures is below.  Gold had a good rally in May and June, reaching all time highs over fears of the European debt crisis. As the debt crisis faded and the equity markets rallied, gold got squeezed out as an investment vehicle and the trend turned lower.

Will the Fib support hold?

I drew the green line at the $1200 level-it has served as a pivot point for the past few months.   A slide in early July pushed gold below $1200, but it managed to regain that area for about a week.  A subsequent break last week pushed it back under $1200, then last Thursday and Friday the $1200 level proved to be resistance as it was unable to push back over it.

Today we saw a sharp move lower; the break under last week’s swing low accelerated the selloff.

So what should traders do in gold futures now?  The red line at $1158.30 is the reason I wrote this update.  $1158.30 is a 50% retracement of this year’s entire rally from $1005 to $1266.50.  If I were holding shorts I would look to cover at least a portion of my shorts here.  We don’t yet know whether this level will hold, but this level is likely support.  We don’t yet know whether this level will be enough support to put in a low, but a bounce from this level wouldn’t be a surprise.

If you want to trade gold on a short term basis, I’d look to buy against this Fibonacci support, looking for a bounce off this oversold level.  Longer term traders or investors; I’m still waiting to buy.  I’d be willing to give up a bit of price for better confirmation that the trend has turned up.

This is a sample of the analysis from my Swing Trader’s Insight advisory service. For information on STI, and to sign up for a free two week trial, visit here.

The information contained here includes information from sources believed to be reliable and accurate, but no guarantee is made as to accuracy, nor do they purport to be complete. Opinions are subject to change without notice. Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.