2. Points To Be Discussed Today:
• Gold Talking Points
• The Bullish Trend In Gold
• From Double Bottom To 1900
• Gold And USD
• XAU To Rise Versus US Dollar If Stock Market Rout
Deepens
• Gold Technical Forecast
• XAUUSD Drops After Correction
3. Gold Talking Points
• Gold prices put in a major breakout at a very key level
last week.
• The potent combo of a dovish FOMC and a really
strong inflation print helped to drive real yields lower,
which helped to support topside in Gold even as the US
Dollar gained.
• Gold is holding within a bullish channel that’s seen 50%
of the recent bearish trend clawed back, making for a
bear flag.
• Buyers can look for pullback themes to the 1834 level
while sellers may have their open door to take a shot at
pullback/reversal themes.
4. Tough Year For Gold Bulls
• It’s been a tough year for Gold bulls, and that
can even span back to last November 9th to
go a little longer than the past year.
• November 9th was a key day as this was
when word of vaccines started to make its way
through markets, about a week after the US
Presidential Election.
5. The Bullish Trend In Gold
• At the time, the bullish trend in Gold
appeared good to go, with price action
holding support around the 23.6% Fibonacci
retracement of the 2018-2020 major move.
• But, as positive news around vaccines started
to circulate Gold prices were punished to the
tune of 5% that day, with price action making
an immediate retreat back down to support.
6. The Bullish Trend In Gold - I
• The next four months were equally
discouraging on the long side, as prices
continued to trickle all the way down to the
1680 level in early-March, which finally
started to show some support.
• This is around a 38.2% Fibonacci retracement
and this price ended up producing a double
bottom formation in March/April.
8. From Double Bottom To 1900
• That double bottom formation produced an outsized
reversal setup. After a second test at the 1680 level in
March, I started to look at the potential for a greater
bullish reversal, and that started to show in mid-April
and through May.
• Prices ran all the way up to the 1900 psychological
level but, again, were thwarted by sellers at resistance.
• This is also around the time that the Fed started to talk
up the prospect of asset purchase taper, which brought
along the implication for an eventual lift-off for rates.
9. From Double Bottom To 1900 - I
• By early-August, prices had already tipped-over for
another test around that 1680 level.
• The bounce from that price went right back to the
1834 area, of which there were already three failed
tests. This price held resistance into last week’s trade
until, finally, bulls were able to punch through.
• That breakout has continued to run, setting a fresh five
month high at the 1877 level.
• Lurking just above is the 1900 psychological level,
which helped to turn around that bullish advance in
June.
11. Gold And USD
• At this point, both Gold and the US Dollar have put in
strong bullish trends over the past week.
• The driver has been expectations for the Fed to react to
inflation but perhaps even more to the point, the
continued drive of inflation is pulling both of these trends.
• The big question is when the Fed might actually pivot into
a more hawkish stance which, to date, hasn’t yet
happened.
• The December FOMC rate decision may present that
situation but the Fed will likely be cognizant of the overall
risk trade and the potential to work against the recovery
that all of this stimulus has been driving for.
12. Gold And USD - I
• But taking a more recent snapshot of price action
in Gold, and applying a Fibonacci retracement to
the pullback move from last August’s high down
to this year’s low, and we can see where prices
are right at the 50% marker of that major move,
plotted at 1876.02.
• There’s also a bullish channel that, when paired
up with the prior sell-off, makes for a bear flag
formation.
13. Gold And USD - II
• If bulls can force a breakout beyond that 50%
marker in the near-term, it would also invalidate
the bear flag and this would be very bullish for
Gold prices.
• For bulls, a breach of the 50% marker opens the
door for bullish breakouts, while a re-test of 1834
keeps the door open for bullish trend entries.
• For shorts – a hold near resistance may be their
shot for playing pullback and possible reversal
themes.
14. XAU To Rise Versus US Dollar If Stock
Market Rout Deepens
• Gold prices remain firm going into the back-end
of the trading week, with a pause in US Dollar
strength and Treasury selling providing cover for
more XAU upside.
• Traders moved back into bonds overnight amid a
weak Wall Street session that saw small-cap
stocks get hammered.
• The 10-year note’s rate fell back under the closely
watched 1.60% level, while the US Dollar DXY
index shed 0.11% overnight.
15. XAU To Rise Versus US Dollar If Stock
Market Rout Deepens - I
• The yellow metal has seen considerable strength
since last week’s US CPI print spurred further
inflationary concerns in the economy.
• That move higher coincided with a stronger
Greenback and Treasury yields – two things that
typically weigh on the non-interest-bearing
metal.
• However, bullion also holds appeal among traders
as an inflation and volatility hedge, which may
explain the recent price action.
16. XAU To Rise Versus US Dollar If Stock
Market Rout Deepens - II
• Given the lack of potential high-impact events
on the calendar through the remainder of the
week, gold may hold its current calculus.
• Moreover, further losses in the stock market
are likely to fuel volatility and push traders
into safe-haven Treasuries.
• That market behavior would bode well for
prices and lower the risk of a stronger US
Dollar derailing recent gains.
17. Gold Technical Forecast
• Gold prices have gyrated around the 1860 mark
over the last handful of sessions following a sharp
move higher last week.
• The recent upside has dragged the 50-Day Simple
Moving Average (SMA) higher, putting it on a
collision course with the longer-term 200-day
SMA.
• An intersection of these two high-profile moving
averages would complete a Golden Cross
formation, which may see a subsequent rise in
prices given the bullish nature of the signal.
19. XAUUSD Drops After Correction - I
• XAUUSD has started a downtrend after a significant sharp rise.
• As expected price broke the support level at 1857 and had a
drop to 1849.
• Currently, price is in the correction phase and has retraced 50%
of the last downside move.
• Moreover, there is a resistance zone around 1864.50 - 1866.50 is
a barrier for price.
• If price closes a bearish 1H candle below the last one and breaks
the support level at 1861, we can expect more drop to 1846 –
1844
• Otherwise, if the resistance zone broken to the upside, price can
grow towards the next resistance level around 1869 - 1870
which price can reacts to and drops from that level.
