Gold analysis (25, May 2020)

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Technical Analysis


Dear followers and copiers,

nearly two months have past from my last Gold updated version of my technical analysis, I think it is time to take a new look at the charts and technical indicators to analyze what's happening to the gold prices and try to find out how to trade it.

In the entry of the beginning of April I offered a short analysis of the Long Term View of what happened in the gold during the last years and gave some analysis of what to expect from the Gold Spot prices depending on how the market of this commodity moved.

It seems that most of what i wrote in that post is still valid for the long  and medium terms.

Here you can read it Gold Analysis (5 April)

Medium Term View


During the last two years, after the temporary bottom printed from the Gold Spot prices around mid August 2018 at around 1600$, the market value of this commodity began to rise within a rising channel delimited from the two ascending violet lines drew on Figure 1.





Figure 1: gold spot daily chart (etoro.com)


From the medium term chart, it appears that the gold prices are increasing within the channel delimited from the violet lines.
After the temporary prices collapsed experienced during the first few weeks of "total-assets-liquidation" triggered from the COVID-19 issue in combination with the oil prices collapse, it appears that the momentum of the trend is picking up steam and accelerating to the upside.




Short Term View


During the last two months, the gold spot prices have been consolidating within the triangle drawn in Figure 2.
The consolidation phase, was already predicted from my previous update because of the over-bought market conditions that could be observed via the elevated values of RSI (around 84 on the 4 hour chart).


Figure 2: Gold Spot 4 hours Chart (etoro.com)




After the 14 of May the prices completed the consolidation phase and managed to break through the resistance level represented from the upper limit of the consolidation triangle.
After that it began a new consolidation phase, but the RSI this time did not reach very elevated levels (below 80 of RSI) and this could indicate that this consolidation phase might not be as long as the previous.

I would expect the gold to move higher from here in the not too distant future, as long the the support line holds (so as long as the prices hold above 1705$).


COT - GOLD

The analysis of the Gold speculative net positions shows a very high number of contracts net long, still the value is lower than the previous weeks, they might soon begin increasing again.


Figure 3: COT - Gold futures




US-Dollar Index


The last graph I wanted to show is the daily chart of the US-Dollar index.
Figure 4 shows that after the COVID-19/OIL collapse in March the index shows a "blow-off" top due to the safe-heave status of which the USD benefits toward most of the other fiat currencies, maybe except for the Japanese Yen.



Figure 4: US-Dollar Index daily Chart (etoro.com)


After the sharp peak the index began a consolidation phase within the triangle delimited from the green lines.
This unusually high values typically hurt the prices of gold.
The fact that gold reached new highs in an environment where the USD is so strong is a testimony of how high the interest in gold shown in the recent period really is and that there is still potential to go higher, especially if the USD begins to weaken a little against other currencies in the following months.


Conclusions


In the last couple of weeks the gold seems to have completed the two month consolidation phase and as long as the support of 1705$ on the spot price holds, it might be ready to move higher again to new levels higher during the next weeks and months.

Seasonally speaking later summer months are very positive for gold prices, especially August and September, but this year the gold might begin to move earlier and the 1800$ target might not be too far in the future, especially if the exception strength of the US dollar begin to attenuate against other currencies.

I thank my Copiers and Followers for the confidence and I wish you a great time moving forward.

Daniele

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The graphs and prices shown in this analysis were taken using as a source www.etoro.com, the platform I am using for my trading as DanieleTrader.
Whoever is interested to follow my trading activity there is welcome to subscribe to the platform using the following link and follow me or Copy-Trade my activity:

Link to Subscribe to eToro Platform


Disclaimer

The content published in this blog represents my personal view.
It is intended for information and educational purposes only and should not be considered investment advice or an investment recommendation.
The reader is solely responsible for his/her investment choices.




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