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Gold recovered from a rocky session on Friday to trade back above $1,470 an ounce this morning. After failing to retest the session's $1,484.80 high, gold quickly broke back down, as a fear of failure allowed the bears take control.
The metal sold off in a hurry, running through stops and below major support at $1,455.80 to $1,458.50 an ounce. This brought it to the next support level, at $1,447.20. At that point, investors once again found value and were able to help gold finish the week back above $1,460.
Last week, Goldman Sachs' exit of its short bet on gold, coupled with the increase in physical demand, helped bullion recover from its April 16 low. However, gold will need to get back above $1,500 an ounce before investors get the psychological sense that it has bottomed.
(Read More: Goldman Flip-Flops on Gold)
The range trade that I posted Friday is still what I consider the main trade to be as this market consolidates. Namely, I see the market staying between $1,437 and $1,487.50. Until gold can close above or below this band, traders must play the levels on either end of the range.
Gold has bounced $160 higher since everyone and their mother sold out of their gold position. Now undergoing what's described as a "back-and-fill" movement.
So what's "back-'n-fill"? It's a technical term describing the price retracement from a dramatic move—such as the one we are seeing since gold fell from $1,523.
Typically, in fierce swings like that, some prices never get traded, as the huge move easily skipped them over. A "back-'n-fill" price movement then goes back to those skipped prices and fills in the chart.
(Read More: True Floor for Gold? How About $1,200?)
As gold surged again on Thursday, for an 11 percent rally back from bullion's April 16 low, some traders began to think that the precious metal had found a floor.
"The big support on the downside is in the $1,200 handle, which is really the cost of production for the highest producers, which are the South African producers," Haigh told Jackie DeAngelis on CNBC's "Futures Now."
Gold is trading higher on Thursday morning, rising up to nearly $1,450 an ounce, just as expected heading into the day's option expiration for the May contracts.
As many investors were long "put" options—which protected their positions above $1,500 and profited from a downside move—they must now exit these puts. (Learn More: CNBC Explains Put Options.)
This week, traders can exit their put positions by buying futures,offsetting these expiring puts. Or instead, traders can sell their puts, which market makers then hedge by countering the trade. The bottom line is we are seeing an overall increase in buying activity. This, coupled with an oversold market, can really bring some much-needed mojo.
The first major target that we expect to reach is between $1,455.80 and $1,458.50. From there, look for a move toward $1,474 to $1,478.20. Although Wednesday's floor close showed $1,423.70, the 4:15 Globex close pressed above $1,430 toward Tuesday's high. This provided momentum.
We're using $1,427 to $1,438.80 as support, and this level provides a solid early buying opportunity. The market is running into light resistance at $1,447.20, but overall price action at this level should encourage additional buying into options expiration at the floor close Thursday afternoon.
That said, a failure to hold between $1,437.50 and $1,438.80 will be very discouraging for the bull camp, and an inability to hold between $1,424 and $1,428 on a downswing will signal a collapse.
Gold climbed to its highest price in 10 days on Thursday, boosted by a weaker dollar and firm prices in other commodities.
Gold hit a high above $1,450 in the session, its highest since April 15, before it posted its biggest ever daily drop in dollar terms.
The correction never came.
The S&P 500 had every opportunity to try and shake out the weaker hands, but it did not. This is an indication of underlying strength, and I now believe that the rally still has more upside.
Earnings season has proven to be far less scary than the market had originally feared, and although the data have been soft, we still have the ongoing tailwind of the Federal Reserve's bond-buying program. We are back to a point where we see disappointing economic data as market positive, because it assures us that there will be no talk of a Fed exit.
I have adopted a bullish bias at current level of 1,580, and I see the market trading up to 1,610. I will rethink that bias on a settle back below 1,570.
Natural gas has been on a natural high. Even as crude and gasoline have gotten crushed this year — not to mention copper, gold, and a whole host of other commodities — nat gas has surged over 25 percent. This as the winter has been colder than expected, boosting the demand for natural gas, which is used to heat homes and offices.
The recent 13 percent two-day plunge in gold led investors to look for reasons. People have blamed the talk of Cyprus selling their gold, gold's general underperformance this year, or a larger move away from risk-off assets.
In a wide-ranging interview on CNBC.com's "Futures Now," the former U.S. representative from Texas noted that 53,000 gold contracts had been sold amid gold's decline, potentially moving the market. And Paul implied that someone in President Obama's administration could be behind it.
This has not been a kind year for crude oil. Even as stocks have risen over 10 percent, crude oil has dropped nearly four percent. This even though crude oil usually rises with the stock market.
There are two main views on what this means. Some say it helps consumers, because it means lower gasoline prices. Others, however, say that crude and gasoline are telling us some bad news about consumers that the market hasn't priced in yet.
(Read More: Will Stocks Get 'Gassed'?)
The firm's commodities research team said the decline in gold was more rapid than it expected, and it exited the trade with a potential gain of 10.4 percent, below its original target price of $1,450.
Back on April 10, when gold was ranging in the upper-$1,500s per troy ounce, Goldman recommended shorting the metal. At the time, it justified that position on the grounds that gold didn't move up significantly when markets were anxious about the bailout of Cyprus and restructuring of its banks.
(Read More: Should Traders Trust Anything Goldman Says?)
Goldman had forecast that gold would close out 2013 at $1,450 per ounce, and then take a hit in 2014 with a predicted close of $1,270. The analysts also thought perhaps they were a bit on the prescient side with that trade, saying: "While we may be end up too early in entering this trade, we prefer that to being late given our belief that the skew to current prices is to the downside."
Within days of that call, gold fell almost 16 percent to a low of $1,321 an ounce. While the bailout of Cyprus did not send gold higher, reports that Cyprus would sell gold to cover its shortfall sent the metal tumbling, as traders bet other European countries might also sell gold to raise cash.
Gold was trading lower Tuesday, after bouncing Monday to settle at $1,421, or $100 above its low.
"Our bias is to expect further declines in gold prices on the combination of continued (exchange-traded fund) outflows as conviction in holding gold continues to wane as well as our economists' forecast for a re-acceleration in U.S. growth later this year," the analysts wrote. They said the surprisingly rapid decline was probably accelerated by breaks in "well-flagged technical support levels."
Cynics might scoff at the timing and motivation of the call, but few traders can argue with Goldman's trading prowess.
"When you make more than 10 percent in a couple of weeks, that's a pretty good return," said Neal Berger, president of investment advisors Eagle's View Capital Management.
Still, despite Goldman's call, other traders see more tough breaks for bullion.
"Gold still has room on the downside," said Anthony Grisanti, president of GRZ Energy and a CNBC contributor. Grisanti noted an important sentiment shift in the pits, with traders now selling rallies whereas before they used to buy dips.
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