Gold takes a front-row seat for the U.S. election. Many traders on the exchange floor are speculating that a Mitt Romney win could continue to strengthen the dollar and could cause further sell-offs in commodities, including gold.
Whatever your political flavor happens to be, gold has firmed up a little since Friday's close, although the dollar (Exchange:.DXY) is continuing to make new swing highs. Currently gold (CEC:Commodities Exchange Centre: GCCV1) is trading just below $1,680 - so do we just ignore the fact that the precious metal that is still trading up roughly 7 percent this year? The 100-day moving average is at $1,672 and the 200-day moving average is at $1,670. Furthermore, the 50 percent retracement this year is at $1,666.50. This tells me that there could be buying interest at this level. (Read More: What You Need to See Before You Buy Gold)
Ironically, immediate uncertainty is actually keeping gold's rebound quiet. With the election a day away, dollar shorts are buying to close, helping a dollar rally. The European Central Bank has a policy meeting this week as Greece once again steals headlines. Japan is considering itself to be entering arecessionary stage, and China ushers in a new generation of leaders. All of this is supportive to the dollar, which means continued pressure on gold, as well as other commodities.
So what's today's trade?
I will look to get short December gold at the first test to $1,692, placing my stop above $1,702 and my target at $1,672.
Since each dollar move in gold translates into $100 dollars, risk for this trade is $1,000 and reward is $2,000.