August Gold settled at $1634.20 per troy ounce, a gain of $17.30 for the day.
Gold futures traded higher in the overnight session on the resumption of London trade, and ahead of the ECB interest rate decision. Though the meeting went largely as expected, with Mario Draghi leaving interest rates unchanged,risk assets sustained rallies throughout the day. Bullion reversed trajectory mid-afternoon however, selling off after the release of the Beige Book. The economic assessment was slightly better than expected, or perhaps more importantly, much better than expected relative to data like last week’s payrolls. Hot money betting on additional Q.E. from the U.S. Federal Reserve may have sold Gold on the report.
Options: Volatility and skew were both offered in today’s rally. This is consistent with gold’s behavior most of the year; volatility has been bid in sell-offs, and rarely performs the same way in a rally. Options sentiment remains somewhat bullish overall. Conclusion: Somewhat Bullish
Gold futures rallied on Wednesday, trading to 1642.40 on the highs before settling for $17.30 on the day. Since Friday we have maintained a bullish prognosis on the metal, even going so far as to draw attention to a bull flag set-up on the the hourly candlestick chart yesterday. The sell-off to 1614 after the close (specifically after the Beige Book at 2:00 PM) adds a slight wrinkle to our thesis, and underscores the possible importance of the 50-day moving average at 1624.70. August Gold settled above this average for the first time since March 13th today, but its subsequent sell-off in the close suggests it could still be an important resistance area.
The weekly chart remains very positive for the metal. As we have said many times, Gold traded above the week of May 14th high on Friday, above the 1600 strike, above the downtrend from the February high, and above the 50-day moving average (but didn’t settle above). The next major target to the upside (for us) is 1715, and a break above it could lead futures to retest all-time highs (1923.70). For bears, 1529 remains the all-important number, but a settlement below last week’s open of 1575.50 would be a crucial first step.