Monday saw a nice rally in gold and silver; they appeared to be breaking out and reversing the trend. However, the rally failed and metals closed below resistance. There are many reasons to believe the trend will reverse to long but until the price action confirms we will stay short.
From a news standpoint, Russia has set a fixed price of 5000 Ruble per Gram of gold. With China and other countries now ignoring the U.S. Dollar the price of gold and silver could soar. The Dollar as the reserve currency could be in jeopardy which would drive metals much higher.
However, everyone knows about this, gold and silver still failed which brings us back to price action. While gold and silver look good, failure at these levels is still a high probability. There is always a fine line between news and price action; markets will always be ahead of the news.
Today the CPI is released at 8:30 est, it promises to be a big number indicating high inflation. Whatever number is released will be well below actual inflation. Like the rest of the FED and government numbers, they are using old models which are nowhere near accurate. Gold could move big after the release of this number
Precious metals should be owned on a physical basis with capital that is not needed tomorrow or anytime soon. Trading should be done with paper knowing that we can trade either side without emotions.
In all markets price action determines what will happen in the next day, week, or months. Keep the two strategies separate, the worst trade anyone can make is turning a trade into an investment hoping for a way out. Traders must learn to take their losses and move on to the next trade.
Patience, discipline, and money management always win the day. Let the map of the markets show you the way.
Todd Horwitz Chief Strategist BubbaTrading.com
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