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Potential 'Long' Gold Trade

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The Gold chart is looking like it could turn bearish with some downward price action.

A fall below $1419 would take it below its 20 DMA on the 'daily' so aggressive traders may use that to initiate Gold short positions. 

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If Gold can stay above its 20 DMA then that would be a bullish indicator for me that could avoid any downward price action. 

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Well there it is a US interest rate cut as expected. It comes as no surprise and Gold touched $1410 though is at that critical 20 DMA level on the 'daily' of $1419. I do expect a further decline but let's see what the price action is in the next 24 hours as the dust settles and the markets look forward to the future expectations. 

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Gold hit $1404 and is currently trading around $1406 so it will interesting to see if Gold can hold and stay above $1400 price level. 

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Silver seems to be leading the way in its bearishness. As they say the bigger the rise, the larger the fall. 

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Well Gold has done the opposite of what I expected and shot back up to $1446!

This demonstrates that economic theory may tell us one thing or what should in theory happen but the market is always delivers surprises or the unexpected. This is why price action is king and why in my personal opinion  it 'trumps' economic theory, historical traditions and patterns. 

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Gold is looking compelling from an investment horizon right now. It looks rather attractive from a longer term trading perspective too. 

Let us start with the 'Monthly'. To me it seems like there is a potential breakout on the horizon which gives a bullish tone to the narrative. The price action will provide confirmation in the months and years to come. The 'Weekly' seems to be showing a stronger narrative of the potential breakout. It is the 'Daily' which is where it begins to get rather interesting and this is coming from someone who does not like Gold as an investment! Here the price action has confirmed the breakout for me.

This narrative continues until the 1 Hour chart where short term problems arise in the upward trending bullish narrative. This is normal and perfectly healthy. 

I would have loved to have shown the respective charts to make my point but for some reason it was not allowing me to do so. Therefore please accept my apologies but I am sure you can switch the timeframes and see for yourself. 

 

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@TrendFollower

I agree, it is still in a strong uptrend - no evidence to the contrary.  Some oscillators show it as being overbought, but that doesn't necessarily mean price is going to fall.  It could just mean it's going another leg higher. 

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@dmedin,

Once you have taken a directional trade with (not against) the trend then hold and do nothing. You can by all means add on the corrections/dips as the price rises. You can also use leverage to maximise your profits in the trade. It requires nothing more. If the trend reverses and you are wrong then ensure you have a stop loss which is not too tight (as you will get stopped out) and take a smallish loss which you are comfortable with. 

The key to succeeding in this strategy is to identity as early as possible (breakout stage) the strongest trending assets to trade. Get this right and you have a better chance of more winning and profitable trades. This of course is my personal opinion based on many years of experience.

Complexity does not count for anything in trading. In fact the market is ruthless and it hates those who think they are clever and know it all. It will take their money (that is if they trade!). The market owes nothing to no one. If a trader wants money then it is going to have an edge to beat the market otherwise yes they may be lucky now and again but over time the market will take from them their capital. 

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@dmedin,

I agree, Gold is in an uptrend longer term. Now as I am a medium to longer term trend follower (some would describe me as a positional trader) then for me the shorter term ups and downs and price fluctuations are irrelevant. This is where timeframes come in. 

I have absolutely no reason to 'Short' Gold. The traders that would short Gold are either day traders, swing traders or shorter term traders. I am none of these. Those traders who are will of course discuss and analyse the shorting potential of Gold with a shorter timeframe involved. 

Price go up and down. This has happened since the start of the markets. It is the way of the markets.

This is a joke but I predict that Gold price will go up and on the way up it will also go down too! I am 100% confident that the Gold price will continue to go up shorter term but along the way the price will go down whilst doing so. I do not need even need to look at a chart to predict this or even draw a single line or arrow on a chart to forecast this.

Now comes the question of timing.  I do not think technical analysis, EWT or any other magical source can predict with accuracy the timing as if it could then those traders would win on the majority of their trades and would hardly ever be wrong. Because I do not have a crystal ball I decide to adopt trend following principles as it does not require precision timing. That is the beauty of trend following. You do not need to buy at the optimum or the lowest point. Timing is one of the most difficult things in trading. There are just so many variables and because I work full time for a living as I feel that trend following allows me the ability to work full time and trade. 

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Gold is trending clearly upwards. It has been since August of last year. If you look at Bonds then they started trending strongly upwards around the two years ago so there was a signal / indicator that Gold could appreciate in price. That is exactly what has happened. Of course timing is the thing that catches most traders out and this is why I monitoring the price action, waiting for the breakout and trend identification with confirmation signals and then entering on the long side makes sense to me.

If you look back at when I started this thread then you will appreciate that I have kept things simple and there has been absolutely no need for complexity.

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Gold is behaving like a safe haven right now and for me it is all about 'Risk On / Risk Off'.

If you look at Bonds and Gilts then you can see that capital is being positioned in safer and more defensive assets with the possibility of a recession in some big and influential economies looking more likely if reports are to be believed. 

Also if there is a sell off (I don't know that there will be one imminently) then that capital has to be allocated somewhere by the very large institutions (they move the price of an asset). It could find itself in Gold and Bonds. 

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Posted (edited)

It's still in a strong uptrend but it's losing some of its oomph.  Now is a really good time to watch closely and look for a nice dip to get long.  1380 would be perfect.

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Edited by dmedin

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@dmedin

If Gold hits your price target and you open a long trade then just hold that trade and do nothing clever until the trend reverses. Set your stop loss appropriately based on your risk tolerance and how much you are willing to lose of your capital or profits if you initiate a trailing stop. I wait until I am in profit to initiate my trailing stop. If you have a strong conviction based on the price action and certain signals and indicators then add on any dips.

Keep is as simple as you can. The key is to make as much profit as you can. The longer you are in a rising trend then the greater your chance of a winning trade and greater profit potential. If you have the risk appetite for it then use leverage on your trade to increase the profits but use a robust risk management strategy before doing so.

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@dmedin,

This is the wrong thread for the big Gold retrace discussion. I think you may have me mixed up with someone else? 😂

 

 

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The Gold retrace is only important if you trade the shorter term movements. I personally don’t and trade the bigger picture and play the longer trend game. 

It is also important if you want to add to your positions on the dips or it changes into a trend reversal. This is important more for me. 

We will all see any retrace via the price action. None us know when exactly it will happen so there is little point in thinking about it unless you want to trade short on the retrace. 

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