Strategic trade
Trade view / 08 July 2016 at 12:45 GMT

In Olympic year, go for gold

Managing Partner / Spotlight Group
United Kingdom
Instrument: GCQ6
Price target:
Market price:

Gold prices have slipped slightly Friday with investors waiting on the influential US employment report due at 1230 GMT. However, there is no sense of concern as the metal remains close to Wednesday’s two-year peak as concerns over the global impact of the Brexit vote continued to dampen sentiment.

As at 1216 GMT, gold (August 2016 GCQ6) was trading at $1,358.35/oz; the August contract ended Thursday’s session 0.37% lower at $1,362.10/oz.

Futures were likely to find support at $1,339.70/oz, the low from July 5 and the first significant resistance is at $1,374.90/oz, Wednesday’s high and a two-year peak.
Source: Spotlight Ideas

Gold has been well supported in recent weeks as a safe-haven investment and a store of value after expectations mounted that central banks around the world will step up monetary stimulus to counteract the negative economic shock from the Brexit vote.

The Bank of England has hinted at a cut in base rate from the current level of 0.5% and when it comes to the Fed, the US is not going to raise rates soon fact the more likely scenario is that we will see a 0.0% to slightly negative Fed Funds rate by this time next year, with a near-flat yield curve as long rates fall faster than short.

This is very much in line with the picture one can see from the time technicals for gold. The very short-term measures are reading neutral to buy but longer measures of one week and longer are flashing strong buy signals.

I am looking at gold as a strategic trade and so I am not especially bothered about near-term noise from the payroll data. I am a buyer of the precious metal.

Gold 5 Year Chart:
Source: Spotlight Ideas 

Management and risk:

Parameters: Gold August 2016 (GCQ6) $/oz.

Entry: Buy 1$,358.35/oz   1116 GMT.

Targets: 1,380.86 ... 1,443.33 ... 1,531.06.

Stop: 1,200.00.

Time horizon:         strategic trade.

— Edited by Martin O'Rourke

Non-independent investment research disclaimer applies. Read more
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