Week of April 15 – Gold Sell Off Incoming?

*Relevant charts are at the bottom of this post* Stay tuned for daily updates this week, in which I detail my trades and the reasons behind every move.

Welcome back everyone, I hope you’re just as excited as me to tackle this week’s headlines! We have a short week of trading but some important news to keep our eyes on nonetheless, here are a few that have a direct/indirect impact on gold prices:

  1. First and foremost, corporate earnings in the US will continue to play a key role in driving the market sentiment this week. Investors will be looking for positive surprises in profits, revenue, and forward guidance. Given the multiple earnings downgrades we’ve had in the past couple of months, positive surprises are likely. Positive market sentiment equals downward pressure of gold.
  2. Trade news updates – Any further updates from the US-China trade negotiations will also have a material impact on market sentiment, and therefore gold. Based on the news we’ve gotten so far, we know that both sides are taking the negotiations seriously, and China has started to become more accommodating of US demands (e.g. providing US firms permission to set up cloud computing and data centers locally). We also saw last week that both sides agreed to set up enforcement teams that will monitor and implement the potential deal if passed, this was a major roadblock that they had to solve before anything is signed. Last but not least, Trump has the motivation to get a meaningful deal signed, since it’ll boost the economy and add momentum to his re-election campaign.
  3. Jobless claims and retail sales data will be coming out on Thursday. Investors will be looking for continuing trend of low jobless claims, and higher than expected retail sales growth.
  4. We’re less likely to get any meaningful updates this week on Brexit, given the recent deadline extension to Oct 31.

What to expect for our trade?

Current position: 40% in $DUST at average cost price of $18.1.

I expect $GDX (index tracking gold miners) to continue experiencing selling pressure given the negative momentum for gold, and based on this thesis my outlook for $GDX is still bearish in the short to medium term. However, there will likely be periods of retracement upwards due to it hitting support regions as it makes its way down. These retracements will provide us with good entry points to add our position in $DUST.  

In summary, we should hold our bearish view and capitalize on any entry opportunities in $DUST throughout the week. However, we must also be ready to adapt to potential positive or negative news that may change our bearish outlook. Part of the reason why we stagger in our positions is also to protect our capital by capping our losses if we get the direction wrong, since no one will be always right in these times of uncertainty. If you want a more detailed explanation of the benefits of staggering your money into the trade, please check out my “Trading Tips and Tools” page.

Gold Priced in USD
GDX – Gold miners ETF
Yields going up is bad for gold

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