I bought a trading position in gold this morning at $1184.30/oz (February 2015 futures). The final day of 2014 gold dump offered what I consider to be a highly attractive risk vs. reward swing trading entry point in the precious metal:

  • Gold has just gotten through one of its worst periods of the year seasonally and is now entering its best time of the year (depending on which time frame you backtest)


Source: Signal Financial Group

  • January shapes up to be an interesting month for the eurozone. Snap elections in Greece are set for January 25th with the anti-eurozone Syriza party leading polls by 3 percentage points. If Syriza wins the 'troika' (ECB/EU/IMF) may no longer be willing to continually ease bailout terms with Greece. Moreover, the IMF which is due to disburse an additional 16 billion euros in aid between now and the 1st quarter of 2016 may backpedal on this commitment setting Greece off into another fiscal crisis without a backstop.
  • It is also worth noting that there is an ECB announcement and press conference on January 22nd. While central banks claim to not be affected by political ongoings, one can't help but to wonder if a QE announcement from the ECB would be especially timely given the Greece situation. In a recent interview Bundesbank President Weidmann offered quotes which seemed to be targeted at talking down some of his fellow ECB council members: "Europe is not as bad off as some believe"  and  "An economic stimulus program has been handed to us (crude oil plunge), why should we add to that with monetary policy?" - Regardless of what the Bundesbank thinks, the following chart is quite likely to jolt the ECB into action:


  • Given the magnitude of the Russian ruble roller coaster of a few weeks ago, this was likely the first shot across the bow (similar to what Bear Stearns was for the Global Financial Crisis) of an emerging markets currency/debt crisis that will gain steam in 2015. Such a crisis is sure to result in more central bank easing and currency devaluations. Gold will shine bright amid yet another round of fiat currency devaluations and sovereign debt defaults.
  • Gold has the potential to form 2 different inverse head & shoulders bottoms on the hourly and daily time frames:


On the daily this possibility would be negated on a move below $1170. Meanwhile, a breakout above $1240 would target ~$1300 and offer a strong probability that the November low marked a major low  on multiple time-frames.


The hourly chart offers a nearly symmetrical inverse head & shoulders possibility with a neckline near $1210, however, a close below $1180 would negate this possible interpretation. 

I am looking for a $50+/oz gain on this trade and I will be stopped out of the trade on an hourly close below the $1170 level. Happy New Year and good trading to all CEO.CA readers in 2015!!