Gold leapt to its 2017 high on Friday, trading up 13 dollars from its open to break the magical 1300.00 level and briefly touch 1301.00. After that, however, the price action was extremely disappointing as it plunged all the way back to finish below its open at 1285.00.
A combination of a weaker dollar, terrorist attacks and a sell-off in equities certainly helped, but the price action mostly has a stop loss driven short covering look about it. A break of the longer term resistance at 1296.00 triggering stop losses with more seen as options structures at 1300.00 strikes were taken out. The fact that gold did not loiter above 1300.00 speaks volumes as to the drivers of the move higher and the subsequent fall.
Additionally, not weekend risk hedging buying was seen into the New York close. This further reinforces the natural of Friday’s rally as if the street has been worried about weekend geopolitics gold would have traded higher into its Friday close.
Unsurprisingly, gold is a couple of dollars lower at 1283.00 this morning with the danger now that more longs will look for the exit on any moves lower. Gold has resistance around 1290.00, but it is the support at 1280.00 initially that traders will be concentrating on more. A break of this level opens further losses to the 1267.00 area.