TGO Exclusive

Why was Gold Trading Down in October

Keen eyes can glance back at October to question why gold was trading down during the month. Did gold bulls lose confidence while the bears victoriously sold off the yellow metal? Are the bulls now lying in wait, ready to jump on the next major headline?

 

Looking a little deeper into the month we can see the XAU gold-futures index for October 1st opened at 1795.22 after accomplishing a 7 month climb to that opening October level, where it challenged and met the previous high set in February 2012. That February high of 1795.22 has proved to be a remarkable area of resistance as price previously respected it in the month of November 2011.

 

Gold Trading Technical Resistance at $1790-$1800

 

Technically that range of 1790 to 1800 has become the level to conquer, since price has not exceeded 1800 since gold reached its all time high of 1920.80 on June 6th of 2011. Not long after that, gold pulled back to 1540.11 from where it made another climb to the resistance level of $1800.  So it is only natural that gold speculators would take a little profit off the table and go into a bit of a holding pattern, considering some significant, market moving events are about to unfold. Who wouldn’t be a little defensive with all the mixed news headlines and political and economic uncertainty?

 

On Friday at 8:30 a.m. ET, Non-Farm Payroll reports are expected to move markets, then we have the presidential election coming on Tuesday, next we have congressional debt ceiling results. All this concurrent with the IMF and European Central Bank trying to keep the European Union from going off a fiscal cliff. With all this uncertainty, is it any wonder that we saw gold slide down in October?

 

We wise and prudent traders protect our capital. We will be intensely watching key indicators of volatility both of the single currency USD and the VIX, which correlated to gold, will suggest further gold speculation is either off or on in the near term. Looking farther down the road, key interest rate differentials may suggest longer term gold positioning. These speculative factors combined with forces of supply and demand issues brought forth by but not limited to China, India, Africa, and Australia are telling forces for gold speculation in the near term and going into 2013.

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