Gold remains confused under $1,400. Is it a currency or safe haven? Whatever your philosophical view of the yellow metal, you have to use the technicals to trade it.
Gold retreated in early Friday trading after rallying into Thursday's electronic close, when it tested the $1,388 pivot level on the upside.
Thursday's low was $1,373, just higher than Wednesday's early low of $1,372. A higher low will help support this market's attempt to consolidate back towards $1,396. However, a violation of this level, and furthermore a close below, will lead to a much lower trade—at a minimum, a test of the $1,364 support level. A close back above $1,380 to $1,383 will help neutralize this market going into the weekend. However, only a close back above $1388.40 to $1390 will help ignite a trade higher.
I have spoken to several hedge fund traders with a billion or more in assets under management, and they have reduced their gold holdings by 2 percent to 6 percent, while increasing stock exposure. This is important, because physical demand alone will not bring gold to all-time highs—the big players must step back in the market.
So what's the trade?
I am selling gold at $1,391, with a target of $1,375 and a stop at $1,406. If the trade is not filled by Friday's close, I will cancel my orders.
But the bottom line is to keep trades short, and not be afraid to take profits. We expect the market to chop around until the next jobs number on July 5.