Gold retraced back almost 50% of last week’s loss as uncertainty continued to weigh in and with U.S elections not being even a month away the volatility will continue to muddle investment instruments. Again with gold seemingly looking a bit torn down post the fall below $1920s, fundamentals continue pouring in support and this time its a massive cause of uncertainty in form of U.S President Donald Trump being diagnosed with the novel coronavirus which will definitely impact forthcoming elections thus generating wide array of speculative bets across asset classes. On the ongoing crisis as in the pandemic, new infections are rising at a very rapid speed compared to a month before in almost every corner of the world signalling more economic pain ahead with no vaccine in sight in the near term while on geopolitical front things haven’t taken a backseat either which only adds to uncertainty if not anything else.
To watch next week – Trump’s coronavirus diagnosis, Powell’s speech, Stimulus talks and other important economic data.
Gold immediately made a green candle after a big red one suggesting the trend might not have changed at all even after the break of crucial support of $1920s rather it continues to remain in an uptrend as the 20 day moving average was tested and the price bounced back. The breakout from inverse head and shoulders pattern remains intact as it also got tested during the fall clearly pointing towards a next leg up till the support holds.
We have 2 scenarios –
1. Gold closed above the support, till this is held it can go to $1901. If this is crossed it can move towards $1921. And if this is taken out it can rally to $1945.
2. Bearish bets might have finally received a wake up call but again the support was held keeping the trend bullish except scalp trades.
Bullish view – Bulls managed a near 50% recovery of past week’s loss mainly on back of increased uncertainty caused by the nearing presidential elections along with the rise in rate of infections across the globe as the pandemic intensifies. For bulls, forgoing $1920s might just be a step backwards to prepare for the next set of rally as across the table all factors be it technical or fundamentals remain largely supportive as it is the best safe haven at the moment with dollar looking comparatively weak. For the price to keep moving higher, bulls need to defend the supports while aiming for fresh highs.
Bears yet again got duped as the supports were held and price bounced back higher.
On larger terms, gold continues to remain bullish and prices are expected to head higher.
Possible trades are on both sides but mainly on upside, gold can be bought above $1921 for the targets of $1945 and $1963 with a stop loss placed below $1908. Longer term target $1989.
Dips towards support (and breakout region) can be used to create longs for the above mentioned targets.
Shorts can be useful for scalp trades only.
Reference: Trading View
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