Gold explodes overnight     

On Tuesday night Gold and Silver exploded higher on the bombings and other geopolitical news overnight. Gold traded as high as 1613 and Silver as high as 1890 before what looks like a substantial pullback. It is 4:30 am EST and gold has given back 3% of its gains so far and could close lower on the day.

Markets are driven on fear, fundamentals or technicals. Huge rallies based on fear which usually create a massive blowoff as we witnessed overnight usually signal the top of the bottom of a major move. Considering the metals were in the middle of a big rally before last night’s action, the overnight blow off more likely put in a market top for now.

To give full disclosure we are long gold and silver however we did sell some overnight and are looking for a spot to short based on our algorithms. For now, our expectations are that the metals should see a reasonable sell off of another 5-6% from where its trading right now. In other words, we would not be surprised to see a pull back to the 1500 -1520 level.

 Todd Horwitz