Gold analysis (28, September 2020)

 

Technical Analysis

Dear followers and copiers,

over 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.

Medium Term View

 

In my previous entry posted around the first week of August, i predicted that after the nice run up of the gold, due to the over-bought conditions shown from the very high RSI values, the gold would most likely enter a consolidation period.

You can read my entry at this link: Gold Analysis (8, August 2020)

 

 

 

Figure 1: Gold Spot Daily Chart (from eToro.com)

On Figure 1 can be observed that just a few days after the post, the gold spot prices begin to fall in order to consolidate and reduce the value of RSI to a more sustainable level.

 

A support around level 1850$ was created, if it hold for a few weeks, might become the level from which the gold prices will attempt to reach and test the resistance levels around 2000$.

If resistance indicated in Figure 1 were bridged, I would look for levels up to 2500$ in the long term.

Instead if the support 1 around 1800$ fails to hold, i would look for the indicated "strong support" at levels around 1700$ for a good opportunity to buy some gold or gold miners and carefully reassess the situation.

Short Term View

 

I think that for the short term view, can be useful to analysis the 4 hours chart of the gold stop prices.

 

 

Figure 2: Gold Spot 4 hours chart (from eToro.com)

 

On Figure 2, I charted the descending channel within which the gold spot prices have been consolidating during the last weeks.

If the prices were to breakout of the channel overcoming the resistance around 1950$, I might indicate that the consolidation phase is completed and the gold prices are preparing to move higher and maybe going to test the previous heighs not long afterwards.

US-Dollar Index

The US-Dollar index has stopped it's down trend around the same time as the gold prices began to consolidate.

Figure 3 shows the daily chart of the US-dollar index, it can be observed that from the second week of August the prices began to consolidate and even slightly increased recently.

 

Such consolidation might soon end and the downtrend of the US-dollar might resume due to several factors.

Figure 3: US-Index spot price daily chart

If the down trend of the US-dollar were to resume the gold will most likely trend higher from the current values. This factor is one of the most important for the gold spot prices in the short to medium term.

 

 

 

Gold COT

 

 

Figure 4 show the Gold speculative net positions.

 

 

 

Figure 4: CFTC Gold net speculative positions

 

It can be seen that the speculative positioning is still highly in favor of a further increase on the gold prices but it has been reducing since the peak of August.

 

This is probably due to some profit taking and it's a healthy process during which new resources were freed that can be allocated back again if some conditions such as a decrease of the value of the US-dollar index or/and a decrease of the treasury bond yield were to occur (due to either new expansion of the balance sheet from the FED or capital influx due to short term uncertainty).

Conclusion

According to my discipline made of a mixture between technical and fundamental analysis, the gold spot prices might be ready to test and breakout of the descending channel it's been consolidating within during the last couple of months.

 

If the some of the conditions I mentioned above are satisfied, a test of the century height and potential bridge of that resistance might be in the cards in the medium period within 4 to 12 months.

 

Who knows how to endure some volatility and knows how to profit from it, might consider to play the possible move upward of the gold prices via stock of the gold miners. Some of my favorite would be GDXJ and Gold Barric because they are quite volatile assets.

 

For who wants to be more careful and have a lower risk tolerance I would suggest to play the gold moves using the GLD ETF.

 

 

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.
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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.