Gold at $2050: Enter the Gamblers
Hartnett on Recession, CS on ChatGPT, and Commodity Demand Upticks
Housekeeping: We hope everyone is having a good holiday be it Passover, Easter, or Ramadan. Another good week for Precious metals, although it feels like it could have been more exciting. Next week should makeup for that
As research goes, not much out in our (and your) areas of interest. We found a nice ChatGPT piece as requested by 2 Founders. Of course there is Hartnett’s macro commentary below as well. Not much else caught our eye.
We are taking the weekend off as far as writing the GoldFix long-form post. However the following tactical note may help prepare for the week ahead if you are a tape watcher or just interested in market dynamics.
Gold and the $2050 level: Enter the Gamblers
Gold market is waiting for the next big order. It’s a waiting game now to see if new buying or long profit-taking will come in first. Marking time, so to speak.
Purusant to that, here is a Goldman report from March 7th. Guess where next momentum fund buying is… $2050
Right now there are buy stops above 2050 and there is selling right below that 2050 price as evidenced by the behavior up there.
What remains to be seen is if one side or the other will lose patience before a news event transpires.. will the sellers get tired of waiting and hit the bid or will the momentum boys go to the market now. That’s the tension right now in this market..
It is the perfect set up for some impulsive betting on Gold’s price.
Placing Your Bets
When the market holds in a pattern after making a new high (and lingering just below that high), many traders (semi professionals) start placing their bets.
It is kind of like seeing a roulette wheel spinning as they walk buy or hearing screams from the craps table. They cannot resist. They all have an opinion on one thing: Will Gold or won’t Gold break the 2050 level??
Let’s start with the bulls.
THE BULLS
Some bought late last week in between 2016 and 2050 in anticipation of continuing bullish behavior. They say:
I think it will definitely go up from here
These types placed their stop losses below; likely starting at $2016 to exit their longs if they are wrong.
But other bulls say…
I think it will continue higher *if* we break that $2050 level.
They frequently place orders to buy Gold on a stop-entry above $2050… Momentum traders and FOMO types like this will then frequently put their stop losses right below $2050 after getting long in case they are wrong.
Then there are the bears.
THE BEARS
The first type walks by the roulette table and says:
No way gold gets above $2050
Thus, they sold it last week between 2050 and 2016. They tend to put their stoploss orders right above $2050, as you would imagine.
Then, there are the momentum Bears. They are the hardest to handicap in terms of price because there is no Goldman report mentioning $2016 as an important price. But rest assured between $2016 and some other lower price, momentum bears will sell into weakness.
Then there are all types of other technical things people will look at now: Bull flags, momentum indicators, VWAP models1 etc.
How to Place a Bet…
But know this: Every one of these tools is a rationalization for gambling right here. The build up of impulsive and resting orders is unknowable unless you are a bank dealer or an algo trader with top level access to the order book deck. The imbalance is unknowable to folks like us.
Do not play this. unless you are prepared to play it 5 times in 30 minutes and potentially lose on 4 of them. Real time tactics are crucial.
So who wins?