Thursday, 31 October 2024

Gold's Pullback: A New Opportunity on the Horizon？

Why gold’s pullback could set up the next big move
 
   
     

Gold’s been on a solid run, climbing up the charts with impressive momentum this year.

But as we saw today, nothing goes straight up.

After hitting $2,800, gold futures (ticker /GC) started to pull back, cooling off right at the top of the channel it’s been trading in for most of this year.
 
 

With a day like gold has had today, you might be wondering: is this pullback a sign to jump in, or are we looking at a pause before more gains?

Well, let’s look at it from a few angles.

The Hundreds Mark in Gold

If there’s one thing I’ve noticed, it’s that gold tends to respect those “hundreds” levels — $2,600, $2,700, and now $2,800.

Whenever it reaches one of these big levels, there’s a pullback. Gold hit $2,800 yesterday, and sure enough, we’re seeing it pull back to around its opening price for the week at $2,749.50.

This isn’t a big deal; in fact, it’s pretty much what you’d expect in a healthy trend.

It’s actually good news for traders: If something goes up too far, too fast, it’s kind of the definition of a bubble.

A quick look at how SMCI performed in Q1 of this year… versus how it’s been looking lately is proof of that.

So what’s next for gold? I think this pullback is setting us up for a good entry point coming up soon. 

And while I’d love it if gold held out until we get past the election and the Fed rate announcement next week, markets don’t always give you that luxury.

But whenever the next setup comes, this pullback could be the start of it.

Channels and Chart Patterns

Now, as I mentioned earlier, maybe you noticed gold trading in a channel recently, with steady upward movement.

When gold hit the top of that channel and started to pull back, it didn’t come as a huge surprise.

While channels aren’t perfect indicators, this one has been fairly consistent.

That said, don’t let any one pattern be your only guide. Gold’s moves are often driven by a mix of technical levels and broader market forces.

What About the Broader Market?

While gold is making moves, the rest of the market’s been holding its breath with the Fed and the election just around the corner.

The SPY, DIA, and QQQ all touched their 50-day moving averages today, somewhat breaking the sideways “holding pattern” they’ve been in for the past 2 weeks.

But here’s the big question: who really wants to be long going into this election and Fed decision? 

Uncertainty is in the air, and a lot of traders — myself included — are going to be playing it safe until we see how things shake out with those two big events next week.

— Geof Smith
   
 
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