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Home / Futures Blog / Gold futures dive after two strong trade sessions

Gold futures dive after two strong trade sessions

October 18, 2013 by Daniels Trading

Strengthening global equities helped pull down gold futures on Friday as the yellowish metal's demand as a safe haven slipped, according to Bloomberg.

Losses on the final trading session of the week reverse two consecutive days of gains, when bullion surged nearly 4 percent. Conjecture about the U.S. Federal Reserve delaying reduction to its economy spurring monetary stimulus measures weakened the U.S. dollar, which emboldens the yellowish metal since the two typically perform the inverse of one another.

"People want to be in equities as the most lucrative investment," president Michael Smith with T&K Futures & Options in Port St. Lucie, Florida told Bloomberg on Friday. "Also, there is some profit-taking after the big rally."

But the precious metal remained north of the milestone price of $1,300 per troy ounce.

At 10:04 a.m. on Friday, gold futures dropped 0.27 percent, a $3.59 loss to $1,316.73 per troy ounce.

Annual streak in peril
Thus far this year, gold is down more than 20 percent, which does not bode well for its annual year streak. Unless bullion reverses course and gains during the next two-plus months, that annual-gain run will halt at 12 years.

Despite the poor performance during the Friday trading session, Reuters reports gold futures are barreling toward their biggest weekly gains in about eight weeks.

Anticipation is running high that the partial government shutdown is a key factor that will play directly into the U.S. central bank's preference to push up implementation of tapering economy-spurring monetary stimulus measures.

This past week, political leaders in the U.S. arrived at an agreement regarding two issues that were riling markets throughout the world. They ended the partial government shutdown and they were able to boost the debt ceiling in advance of a looming deadline.

But some say the solution to the debt ceiling debacle merely is a palliative because it pushes up the issue to a later date.

Investors and analysts said efforts are underway to determine the extent of damage during the three-week partial government shutdown. They already are reconciling themselves to understanding that the Fed's tapering of asset purchases is likely to delay tapering well beyond this month. That could come next year, but that is subject to change as well.

"We're now focusing on two things: the next time we'll have a debate on the (debt ceiling) issue, which is February, and tapering," analyst David Wilson with Citi told Reuters on Friday. "The debate has moved on from if to when (tapering will happen), so that will be continually factored into the gold price."

Analyst advises sell
The analyst told the news source that wise men will unload the yellowish metal.

"Right now, I think gold's a sell," Wilson told Reuters. "I would think the trading range we had in the five or six days before (Thursday) is one we'll go back to."

MarketWatch reports gold futures surged as much as $40 dollars per troy ounce during the Thursday trade session as a result of the agreement regarding the debt ceiling.

The U.S. was able to avoid defaulting for the first time on financial obligations but that agreement only pushes up the next time that feuding political parties take up the issue to next year.

"In a nutshell, we are back to business as normal where the U.S. government spends way too much money; which we have to borrow on the global market," managing director Jeffrey Wright with H.C. Wainwright LLC told the MarketWatch. "We have no realistic way to pay it back and even with a 'shrinking' rate of deficits, the situation is not sustainable."

Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

Filed Under: Archived News

About Daniels Trading

Daniels Trading is an independent futures brokerage firm located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading is built on a culture of trust committed to the firm’s mission of Independence, Objectivity and Reliability.

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Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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