CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Gold volatility with the prospect of another bout of near term profit-taking

Trading outlook:
Gold pushing above $1700 today is positive, but given the huge volatility throughout major markets and a negative candle formation developing today, the outlook is uncertain on a near term basis. We are still bullish gold on a medium-term basis, and any near term weakness is a chance to buy.

 

Fundamentals/Newsflow

Safe havens are in favour throughout major markets, but it is interesting that gold has pared gains today. With equities getting smashed, could there be a fear that gold could be dragged in with the broad sell-off? On Friday 28th February, gold inexplicably fell when there was a rout on Wall Street and a raft of margin calls meant that long positions on gold futures were forced closed. This created a near term (near -4%) sell-off on gold. This is the big caveat that is facing traders long and bullish of gold.

Fundamentally we remain medium-term bullish, due to the increasingly dovish interest rate expectations and increasingly negative real yields. We see any near term weakness therefore as a chance to buy whilst markets remain spooked by Coronavirus.

 

Support
  • $1657 – Intraday low, 9th March
  • $1647 – 6th March low
  • $1642 – 23.6% Fibonacci retracement of $1445/$1702
Resistance 
  • $1702 – intraday high, 9th March high
  • $1754 – November 2012 high
  • $1795 – 2012 high

 

Technical Analysis

Gold has hit $1700 for the first time since 2012 today, but has already instantly pulled back. Price volatility remains distinctly elevated, with the Average True Range of $37 already almost having been seen. Momentum is positive, still rising, but given the extreme nature of market swings right now, the prospect of a retracement needs to be considered. There are hints of a potential negative divergence to watch for on the daily chart, hints that are greater on the hourly momentum indicators. Under $1660 support on a closing basis would be asking some questions of the bulls. Then the retracement potential rises. 23.6% Fibonacci of now $1445/$1702 comes in at $1642, whilst the $1611 breakout is also supportive.

 

Richard Perry

Richard Perry

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