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Gold Trading Strategy for the week 24-28 Feb 2014

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Gold Chart 24 Feb 2014
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Gold prices are setting fresh three month highs

As gold prices keep marking new highs we are embarking on a quest to devise a sound strategy on how to trade it this week. Since fundamental factors are supporting prices really well we believe that this is a good time to look for opportunities to buy calls.

The first level that we have identified to buy daily calls is last week's highs around 1332. As of writing prices are above 1337 so it would take a five dollar move in order for our position to be triggered. We believe the level could be reached in the next 24 hours.

With new developments in Ukraine and the threat of the country's default seeming quite real, we think that the geopolitical situation is a very big part of the bullish gold story. Investors are seeking safety in these tumultuous times and good old gold is certainly providing it.

We have social unrest in Venezuela and Thailand yet, so the escalation of these nuances could prove to provide more upside pressure on the price of the precious metal. Of course, nobody knows how long it will go on, but separatist moods in Ukrainian region of Sevastopol where there is a Russian military base cannot spell quick resolution of that conflict.

While we are of the opinion that the Federal Reserve will continue to reduce the pace of treasury purchases, there is a very long period ahead that can't really put a hold on low interest rates policies. The world is not experiencing the fastest pace of growth, so major economies remain fragile.

With the Chinese Dragon seemingly tired there is no telling when are we going to see some financial turmoil in that part of the world. Exponential rise in credit will certainly hamper the economic prospects for the whole Far East region. Gold may yet again be looked as a safe-heaven bet.

Stay tuned to our daily updates on our strategy to trade gold this week in the comments section below.

Comments

Matt T.'s picture

A constructive bullish picture is emerging on the hourly charts in Gold trading. If we see a sustained close above $1331 we will buy daily calls at the end of the hour, for those of you who are willing to be safe - we recommend to set the expiry time for Monday. The scenarios would be invalidated if prices reverse and close below the blue line that we have drawn on our chart - namely levels below $1325. Have a nice weekend and stay tuned for our strategy next week, that will be on the king of forex trading pairs - the EUR/USD.Gold Chart 28 Feb 2014

Matt T.
Matt T.'s picture

Gold is looking toppy at this stage in time - look for a test of yesterday's lows around 1324 as prices are reacting to the federal reserve's chairwoman testimony in front of the Senate Banking Committee. As of right now we would avoid the upside since it was so soundly rejected for a second day running. Only a break above today's high around 1336 could make us change our minds, so don't write it off completely just yet. On the downside we are seeing Gold going to 1300 if we manage a sustained daily close below 1320.Gold Chart 27 Feb 2014

Matt T.
Whishaw's picture

Hi Matthew - your trading logic is awesome I would definitely look to buy puts today. Can you recommend a good broker?

Whishaw
Matt T.'s picture

Direction has sharply reversed and our scenario of a break below 1332 has been triggered. Our opinion at this point in time is the prices could consolidate in the near term so we are staying on the sidelines. If you see a break below 1322 on a sustained hourly basis look to buy puts, if however you observe a rise towrds 1340 again rest assured that the top will be tested yet again. There is no telling on what could happen next, however if we stay within the day's ranges that could provide for a better opportunity of Friday.Gold Chart 26 Feb 2014

Matt T.
Matt T.'s picture

Our Gold trade was spot on the money - a simple buy call click 1332 today is about to yield us some nice profits. Our strategy remains to buy daily calls on dips. As the chart shows we are trending within an upwardly moving channel for now. Expect the base to be tested somewhere around 1335, this is our first opportunity to hop on the train again. However if we see a break below 1332 on a sustained hourly basis a short term top could be set in place. Stay tuned for more as the trading week is just beginning and cograts to all of you who enjoyed yesterday's call.Gold Chart 25 Feb 2014

Matt T.

Disclaimer: The article is written for informative purposes only and it is not financial advice. The author does not have any position in the currency pairs mentioned, and no plans to initiate a position. He wrote the article himself and expressed his own opinions. He has no business nor personal relationships with any mentioned government entities or stocks. Readers should not treat any opinion expressed by the author as a specific inducement to make a particular trade or follow a particular strategy, but only as an expression of his opinion.

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