What about Gold?
By: DAW Trading and Blue Line Futures
Gold has lost about 7% since September. Bitcoin is the new Gold. The Fed is tightening. Interest rates are going higher. There is no need for Gold anymore. WRONG. Yes, Gold is trading below the 200-day moving average for the first time since July, the Fed is about to hike interest rates and tax-reform legislation is about to be signed but it’s easy to forget that Gold was up as much as 18% this year. Gold is seeing pressure ahead of the December 13th Fed rate decision and tax-reform, but we don’t view it as a bad thing. After violating support this will allow price action to cleanse the overextended net-long ratio. In fact, over the years, weakness in Gold during the month of December is not uncommon and has come for a number of reasons; hawkish Fed language, tax-selling and strong seasonals in the equity market. However, this year we expect a less hawkish or even potentially dovish Fed coupled with overshadowing geopolitical issues to characterize the turn of the calendar year. For us, the icing on the top is Gold’s strong seasonality in the month of January; Gold has finished the month of January positive in nine out of the last twelve years. Out of the three years it failed to do so the first was 2010. That year it traded in the green by more than 6% in the month of January before finishing down about 1%. The second year was 2011, that year it gained as much as 35% when it hit its all-time high in September. The only year since 2005 that it did not give Gold bulls who bought in the days surrounding December 31st a clear-cut opportunity to profit was 2013, a year that Gold bulls truly want to forget about. In summary, we believe that lower price action for Gold in the next three weeks should not be a death sentence for the metal but instead viewed upon as a sale to buy.
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