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Technical Analysis

Gold: An Important Decision

by Ivano Celia, on Mar 30, 2020 12:44:56 PM

Gold - Daily Market Update 30MAR2020

Gold couldn't bring itself to make a final decision at the end of last week, unable to provide guidance for traders for this coming week. However, the market is signaling a clear trend which continues to point south rather than north. Thus, the stock market does not succeed in reducing the negative momentum on a daily basis, and as for the time levels below it, it is building up again.

The market simply does not seem to be able to sustain a breakout at prices above $1704. In addition, an attack was lead on the new all-time highs that many investors might want. The sticking point is, and remains, the structure that has been formed since the low in 2015, which simply cannot be linked to an impulse. In the case of another high above $1704, this should be seen as a corrective move that will ultimately lead to new lows. If it stinks of fish, it is usually fish!

Gold 4h Stunden Tages-Chart

The current stock market phase should make everyone humble and even further yet, should make it clear that there is no place in the market for wishful thinking. Gold was supposed to protect against such catestrophic events and crises such as COVID-19, but so far it has failed miserably. There is no point in fighting against such things. But here I would clearly make the difference to physical gold. I am joining a prominent group of trading professionals here and I am also a supporter of the idea that at least 30% of your assets should be held in gold.

If not because of an apocalypse, then because of the threat of inflation and hyper-inflation, in view of the unbridled printing of money by central banks worldwide. See also my previous article on this subject.

Gold is not, at least for the moment, a protection against a fall in prices. So for trades, especially for tradable paper gold, it is important to continue to assess the facts soberly. These facts currently foresee a sell-off that should bring the market back below $1400 an ounce. As already explained on Friday, there is once again a possible exit between $1589 and $1527 an ounce, but this assumes that the wave is old. Put simply, an exception must be made for this and that is never good.

The path of least resistance - which markets usually take - would then in any case not exist. In the event that paper-gold on the stock exchanges does take this route, prices above $1704 would be in and the $1760 range would then be attainable. However, this would not change the overall bearish orientation for the time being.


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Conclusion from last week:

Primarily, we're looking at another paper-gold sale. If we cannot go below the mentioned ranges, we have to assume another detour with higher prices for the time being and I would then enter long again to take a possible move towards $ 1760 an ounce.

At the moment I have been active since last week with a still risky short at $1603.80 and a minus of -1.31% so far. The trade is secured by a relatively expensive call option. The currency risk is hedged by a corresponding USDCHF short hedge trade. Based on the current situation, we should see a confirmation of this short with a corrected target below $1400 today or tomorrow. Today, another early short trade with manageable risk capital in the S&P 500 at $2539.5 with a price target of $1900. On balance of all trades so far in neutral green with small profit.

To be continued. Stay healthy!

Topic:Asset AllocationActive TradingInvestment StrategyGold
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