Gold may have predicted the Summers withdrawal

Larry Summers
Andrew Harrer | Bloomberg | Getty Images
Larry Summers

As the Larry Summers news boosts the gold market, December gold futures should be well supported above $1,308.30.

With news that Summers withdrew his name from consideration to replace Ben Bernanke as Fed chairman, gold opened higher Sunday night. This continued the bullish momentum we saw into the electronic close on Friday.

(Read more: Get ready for a Summers rally after exit from Fed race)

On Sunday, gold traded up more than $25 from its Friday floor close, reaching a high of $1,336. This may look like a monstrous open, since gold closed the floor session on Friday at $1,308.60, but in reality, the electronic session went off just below $1,330, and gold traded less than $10 higher on Sunday night.

While the news about Summers broke on Sunday, gold's quick surge on Friday led some to wonder whether speculation in fact began late Friday. On Friday, the White House responded to a report that a Summers appointment announcement was imminent by saying that Bernanke's replacement had not yet been chosen. Some say that's what led to gold's rally into the electronic close.

After all, Janet Yellen, who is now the likely replacement, is clearly more of a dove, and would be inclined to keep Fed stimulus on the table longer. Since more stimulus means lower bond yields and perhaps a higher chance of inflation, this is seen as bullish for gold.

(Read more: Bernanke staying still possible with Summers out?)

Gold's floor close on Friday was at the major $1,308.30 retracement level, and bulls can look to buy this level on the first time it is tested on Monday, as it will be the first strong support level. A close below here will be bearish, and likely send the market consolidating between $1,296.80 and $1,308.30 heading into Wednesday's big Fed policy announcement. A close below $1,296.80, though, will bring the two major support levels below here into play: $1,278.60 and $1,271.80.

Rich Ilczyszyn is founder and CEO of iiTrader. Follow him on Twitter @iiTrader.

Watch "Futures Now" Tuesdays and Thursdays at 1 p.m. EDT exclusively on FuturesNow.CNBC.com!

Like us on Facebook! Facebook.com/CNBCFuturesNow.

Follow us on Twitter! @CNBCFuturesNow.

Contact Futures Now

  • Showtimes

    Watch Futures Now Tuesdays & Thursdays 1p ET exclusively on cnbc.com!

Sponsor Links

  • CME Group brings buyers and sellers together through its CME Globex electronic trading platform and trading facilities in New York and Chicago.

  • Take your trading to the next level with a platform that lets you trade stocks, options, futures and forex all in one place with no platform or data with no trade minimums. Open an account with TD Ameritrade and get up to $600 cash.