Potential 'Long' Gold Trade

[TrendFollower 588]

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. 

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

[TrendFollower 588]

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. 

[TrendFollower 588]

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. 

[TrendFollower 588]

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

[TrendFollower 588]

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. 

[TrendFollower 588]

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. 

 

[dmedin 232]

@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. 

[TrendFollower 588]

@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. 

[TrendFollower 588]

@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. 

[TrendFollower 588]

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.

[TrendFollower 588]

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. 

[scarlettsmith694 0]

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[dmedin 232]

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.

Edited August 19 by dmedin

[TrendFollower 588]

@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.

[TheGuru12 44]

Lined up perfectly for a rally! 

https://www.zerohedge.com/news/2019-08-07/goldman-sees-gold-rising-1600-or-even-higher-escalating-trade-war-1

It literally needs a bit of a nudge from some bad news, So we are on track for 1580 this week at least. 

[TrendFollower 588]

@TheGuru12,

Your at least 1580 did not come this week. 

 

[dmedin 232]

Any sign of that big gold retrace yet?

[TrendFollower 588]

@dmedin,

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

 

 

[TrendFollower 588]

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. 

[TrendFollower 588]

If you look at Gold on the 'daily' then you will see that it has been making a series of 'lower highs' since the start of September 2019. 

I have highlighted this in the chart below using 'red ovals'. 

In terms of adding to any long positions on the dips or starting a new trade 'long' then one could consider waiting for the previous 'lower high' to be taken out by the price action before executing any such trade. Obviously there are many other methods but right now we do not know if Gold is going to continue going downwards and make another new 'lower high'. 

[dmedin 232]

That candle doesn't bode well for gold

[TrendFollower 588]

@dmedin,

Gold's price is related to 'Risk On' and 'Risk Off' perceived say six months into the future. It is what the market thinks could happen or is likely to happen down the road. Now this can change based on economic data being released by the US and other large world economies. It can also change based on war escalations around the world or change based on sentiment change and major news stories which affect countries and their citizens. 

This creates the price action for Gold. The narrative and backdrop is important. Right now the market seems unsure as to what is going to happen in relation to US-China trade war and UK and EU Brexit. This is not allowing Gold to continue upwards or downwards in a stronger way. 

[TrendFollower 588]

Gold has just made another 'lower high'. However it seems to the downtrend is beginning to show signs of weakness which could lead to a consideration period.

It has not made a 'lower low' on this recent downtrend and weakness. 

With Brexit delayed further and no real major negative news on the US-China trade scenario, it seems Gold may well begin to consolidate shortly if another 'lower low' is not made.

[TrendFollower 588]

If Gold is going consolidate at these levels (and it is a big if) then anything less than $1500 may be a good entry point for new entrants or adding to your positions for Gold traders. 

[TrendFollower 588]

Some of you will find this very interesting.

It just shows you how important the US is when it comes to the Gold price. It holds the most Gold reserves in tonnes and Gold is prices in the World's Reserve Currency which is US Dollars. 

The other important thing to look at is which country is increasing its Gold reserves. Germany has actually declined but Russia has increased its Gold reserves significantly over the past 10 years. So too has China. Usbekistan and Kazakhstan have as well. 

The data below is simply fascinating. 

Central Bank Gold Reserves

Country	Population 2018	Gold reserves 2009 (tonnes)	Gold reserves 2019 (tonnes)	Gold reserves % change	Gold reserves per head (grams)
United States	327,167,434	8,133	8,133	0%	25.01
Germany	82,927,922	3,407	3,370	-1%	40.75
Italy	60,431,283	2,452	2,452	0%	40.50
France	66,987,244	2,435	2,436	0%	36.30
Russia	144,478,050	649	2,113	226%	14.62
China	1,392,730,000	1,054	1,853	76%	1.34
Switzerland	8,516,543	1,040	1,040	0%	123.06
Japan	126,529,100	765	765	0%	6.04
Netherlands	17,231,017	612	612	0%	35.75
India	1,352,617,328	558	600	8%	0.45
Portugal	10,281,762	383	383	0%	37.14
Uzbekistan	32,955,400	175	355	103%	10.95
Kazakhstan	18,276,499	70	350	397%	19.43
Saudi Arabia	33,699,947	323	323	0%	9.81
United Kingdom	66,488,991	310	310	0%	4.70
Lebanon	6,848,925	287	287	0%	47.16
Spain	46,723,749	282	282	0%	6.04
Austria	8,847,037	280	280	0%	31.83
Turkey	82,319,724	116	254	118%	3.14
Belgium	11,422,068	228	227	0%	19.98
Philippines	106,651,922	155	198	28%	1.89
Algeria	42,228,429	174	174	0%	4.20
Venezuela	28,870,195	361	161	-55%	5.04
Thailand	69,428,524	84	154	83%	2.23
Poland	37,978,548	103	129	25%	3.39
Singapore	5,638,676	127	127	0%	22.70
Sweden	10,183,175	126	126	0%	12.50
South Africa	57,779,622	125	125	0%	2.21
Mexico	126,190,788	9	120	1301%	0.93
Libya	6,678,567	144	117	-19%	18.30
Greece	10,727,668	112	113	1%	10.52
South Korea	51,635,256	14	104	624%	2.03
Romania	19,473,936	104	104	0%	5.30
Iraq	38,433,600	6	96	1541%	2.52
Kuwait	4,137,309	79	79	0%	19.09
Indonesia	267,663,435	73	79	8%	0.30
Egypt	98,423,595	76	78	4%	0.80
Australia	24,992,369	80	69	-14%	2.79
Brazil	209,469,333	34	67	100%	0.32
Denmark	5,797,446	67	67	0%	11.54
Pakistan	212,215,030	65	65	-1%	0.33
Argentina	44,494,502	55	55	0%	1.24
Finland	5,518,050	49	49	0%	8.92
Belarus	9,485,386	23	47	103%	4.94
Jordan	9,956,011	13	44	241%	4.49
Bolivia	11,353,142	28	43	50%	3.85
Bulgaria	7,024,216	40	40	1%	5.71
Malaysia	31,528,585	36	39	7%	1.23
Burundi	11,175,378	0	38	128492%	3.54
Peru	31,989,256	35	35	0%	1.08
Slovakia	5,447,011	32	32	0%	5.83
Hungary	9,768,785	3	32	924%	3.22
Qatar	2,781,677	12	31	152%	11.84
Syria	16,906,283	26	26	0%	1.41
Ukraine	44,622,516	27	24	-10%	0.54
Tajikistan	9,100,837	2	22	868%	2.50
Morocco	36,029,138	22	22	0%	0.62
Afghanistan	37,172,386	22	22	0%	0.61
Nigeria	195,874,740	21	21	0%	0.11
Serbia	6,982,084	13	20	56%	2.91
Sri Lanka	21,670,000	21	20	-5%	0.93
Mongolia	3,170,208	1	19	1906%	6.07
Bangladesh	161,356,039	4	14	298%	0.08
Cyprus	1,189,265	14	14	0%	11.79
Colombia	49,648,685	7	13	87%	0.26
Mauritius	1,265,303	4	12	218%	9.83
Cambodia	16,249,798	12	12	0%	0.78
Ecuador	17,084,357	26	12	-55%	0.71
Kyrgyzstan	6,315,800	3	11	333%	1.81
Czech Republic	10,625,695	13	9	-32%	0.83
Ghana	29,767,108	9	9	0%	0.30
Paraguay	6,956,071	1	8	1141%	1.20
United Arab Emirates	9,630,959	0	7	0%	0.80
Myanmar	53,708,395	7	7	0%	0.14
Guatemala	17,247,807	7	7	0%	0.41
North Macedonia	2,082,958	0	7	0%	0.00
Tunisia	11,565,204	7	7	0%	0.59
Latvia	1,926,542	8	7	-14%	3.41
Nepal	28,087,871	1	7	349%	0.22
Ireland	4,853,506	6	6	0%	1.25
Lithuania	2,789,533	6	6	0%	2.06
Bahrain	1,569,439	5	5	0%	3.13
Mozambique	29,495,962	2	4	87%	0.15
Slovenia	2,067,372	3	3	-1%	1.54
Aruba	105,845	3	3	0%	29.55
Bosnia and Herzegovina	3,323,929	1	3	127%	0.85
Luxembourg	607,728	2	2	0%	3.76
Hong Kong	7,451,000	2	2	0%	0.28
Iceland	353,574	2	2	0%	5.78
Papua New Guinea	8,606,316	2	2	0%	0.24
Trinidad and Tobago	1,389,858	2	2	1%	1.41
Haiti	11,123,176	0	2	4351%	0.16
Albania	2,866,376	2	2	-1%	0.54
Yemen	28,498,687	2	2	0%	0.06
Suriname	575,991	2	1	-20%	2.45
El Salvador	6,420,744	7	1	-81%	0.22
Laos	7,061,507	9	1	-90%	0.13
Honduras	9,587,522	1	1	3%	0.07
Dominican Republic	10,627,165	1	1	0%	0.05

[TrendFollower 588]

A low US interest rate environment should be good for Gold (denominated in US Dollars). 

[TrendFollower 588]

It seems Gold is breaking out of its downward trend as illustrated by my chart below:

Now this could still reverse but the signs look encouraging with the backdrop of the US Federal Reserve lowering interest rates. 

[TrendFollower 588]

If you look at the 'monthly' for Gold then it does look ripe for a rise towards $1800 to $2000. 

 

On the 'weekly' it seems the first hurdle is $1600 followed by the next major hurdle of $1800. 

 

 

Edited October 31 by TrendFollower

[TrendFollower 588]

@CharlotteIG,

My thoughts on Gold. 

[TrendFollower 588]

Gold is approaching what is a critical point in my view. I don't always believe that past patterns have to play out the same in the future but I accept on many occasions they have. Gold is approaching such a point.

I am going to show you a chart below where I have highlighted the previous time a very similar patter on the 'daily' manifested itself and then what happened afterwards was a big move upwards. Could the same happen again?