Gold had a wild week where it swung little more than $130 after gaping up on the first day. This unprecedented spin off post the breakout in daily timeframe can mostly be attributed to a sudden risk on attitude in the financial market which is clearly visible through bonds. Again fundamentally nothing absolutely nothing budged apart from an unexpected smooth transition of U.S presidency as Donald Trump vowed to provide so which was a question mark till it was announced. Infact more of negativity got collected in the past week mainly arising due to events (breach of U.S Capitol building by Trump supporters) connected with the outgoing president Donald Trump only which now has snowballed into another first in history types where again cries of impeachment has gone loud. This has raised the bar of uncertainty which does not seem to die down as after a brief positive development a larger negative one keeps the hands always full. Gold remains the best asset class in these times as developments are becoming extra sudden with the pandemic still continuing to wreck havoc as world now has to put a fight against the new strain which is spreading like the coronavirus did in its early days. To watch next week – Fed chair Jerome Powell speech, earnings , stimulus hopes, political developments and other important economic data.
On the chart –
Gold erupted higher as it broke through the consolidation via a gap up but failed to cling on above the breakout though the charts now are a bit confusing as it did actually break the flag but at the end of the week it settled much deeper back in the zone. This might be seen as a failed breakout attempt in weekly timeframe but likely a distorted breakout in daily as the pattern of inverse head and shoulders looks to be in formation which still keeps the trend bullish . We have 2 scenarios –
1. Gold closed above the support, till this is held it can go to $1857. If this is crossed it can move towards $1875. And if this is taken out it can rally to $1886.
2. Bears tried to find themselves once again as the weekly breakout got negated but still they need to do a lot to change trend in their favor except scalp trades.
Bullish view – Bulls surpassed a major hurdle of breaking the consolidation with a good gap up but failed to build on it. They rather got messed up in the charts as weekly shows a failed attempt while daily depicts another chance to surge higher. The aspects favoring them hasn’t changed as fundamentals remain highly supportive while technical(s) have become somewhat less bullish due to last week’s unstable move.
Bearishness still fails to entice.
On larger terms, gold remains bullish and prices are expected to head higher.
Possible trades are on both sides but mainly on upside, gold can be bought above $1858 for the targets of $1875 and $1886 with a stop loss placed below $1848. Longer term target $1901.
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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