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GOLD ANALYSIS: HERE ARE THE IMPORTANT LEVELS TO FOLLOW.

Where is Gold headed? The yellow metal, after passing the psychological threshold of $2,000 per ounce, abruptly halted its climb. The approximately 5 percent drop in the share price on August 11 has set off a loud alarm bell for many investors.

Where is Gold really headed then? In this previous article, in which I emphasized my bullish position for this commodity, I pointed out how Gold could lateralize for a while below the $2,000 area, to be precise between $1900 and $2,000. Effectively that is what is happening, and for the time being I remain with my idea.

A key role is played by the U.S. dollar. In fact, in recent days, the dollar has managed to gain some strength over the euro, closing the week around 1.1800. Important signal, but we remain in bullish trend (on eurusd I would like to see daily breaks of the 25-period exponential average and then breaks of 1.1700 to see it turned short). In fact, the EUR/USD and GOLD charts have been quite similar and correlated lately. Both suffered a stop to their run at about the same time. It will be to be seen next week whether the USD might resume its devaluation, making fertile ground for a rise in gold.

But let’s look at the interesting levels for a moment. Where is Gold headed? Let us take the H4 chart of the Gold Future contract with expiration 12-20.

Gold. Technical Analysis
Gold Fut 12-20, H4

We can immediately see that 1930$ area, has been a good support. In fact, the price has heard it several times. Highlighting the proximity to the 200-period average (above it) may indicate to us that gold is always bought back at this level. At decisive breaks we could see a slide that should still hold the lows in the $1870/$1900 area, broken which, we could enter dangerous bearish territory.

Upper levels are found at 1980$, the breakout area of the last sideways phase of August 13/14. A break of these would project prices to $2000, an important psychological threshold where a long/short battle will take place. Between 1930$ and 1980$ we then hold a sideways range , where price is not clearly telling us what direction it wants to take. In my opinion, therefore, it is not a great idea to take heavy long-term bearish positions until there are clear signs of subsidence, which for now are not coming.

We always remember that August is a “strange” month full of erratic movements for traders.

That said, everyone is free to have their own view on the markets. There are those who see gold at $1500 and those who see it at $2500, but that is not what matters. As Soros teaches us, the important thing in this world is to be able to readjust one’s beliefs to what is happening in the markets and not be afraid to refute one’s publicly expressed ideas. No one is right if you think along these lines. Those who will profit in the long run will have the reason.

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