2019-11-11 • Updated
In the recent days, the US dollar index reached the highs of July 2017. It’s not a surprise that other assets significantly depreciated against the USD. Gold isn’t an exception.
The downward trend of XAU/USD has been continuing since the middle of April 2018. It seemed an escalation of the trade wars tensions should support gold as it’s the safe-haven. However, it didn’t happen as the USD appeared to be the stronger safe-haven in the environment of trade wars. Moreover, all this time the US dollar has been supported by American rate hikes. That made it even stronger. As we can see, gold just didn’t have chances to rise in such conditions.
However, as we know markets are highly changeable. The downtrend will be replaced by the uptrend one day. But when will the reversal point for gold happen?
According to the CFTC Commitment of Traders report, net short positions for gold increased in the week to August 7.
However, every trader should remember the main rule: sell in good times, buy in bad times. We see that the number of short positions significantly increased. It may signal that soon traders will want to buy gold as the price will be low enough.
As a result, an important question is raised: when it’s time to start buying. Is gold at the lowest levels now or it’s better to wait longer?
According to Bloomberg, hedge funds have never been so pessimistic about gold prices. Managers bet on the further decline. Analysts say gold prices will keep suffering in the short term. However, there are no fundamental factors that can help us to make predictions now. That’s why let’s have a look at the technical side.
Up to now, XAU/USD has been trading at lows of the end of 2016. MAs has been moving down and the Ichimoku cloud signals the further fall of the pair. The next support is at 1,180. In case the pair breaks this level, the further great plunge to 1,125 will be anticipated.
To understand when the reversal point is, it worth to look at the Relative Strength Index. The main idea is that when the index is above 70, the pair is overbought, it’s time to sell. When the index is below 30, the pair is oversold, so it’s time to buy. Up to now, the index is at 30. As a result, we don’t see the strong signal that the pair is oversold. Therefore, the time to buy hasn’t come. As soon as the index is below 30 and other technical indicators such as MAs, candlesticks, MACD signal reversal, traders should open long positions.
Making a conclusion, we can say that the gold market is anticipated to fall further in the near future. However, upside risks exist. Traders should pay attention to the technical indicators that will give a clearer picture of the further direction of the gold prices.
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Hello again my friends, it’s time for another episode of “What to Trade,” this time, for the month of April. As usual, I present to you some of my most anticipated trade ideas for the month of April, according to my technical analysis style. I therefore encourage you to do your due diligence, as always, and manage your risks appropriately.
Bearish scenario: Sell below 1.0820 / 1.0841... Bullish scenario: Buy above 1.0827...
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