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Gold: breaking through towards $2000?
Information is not investment advice
Observations
Gold made another upswing recently in a relatively balanced uptrend. Currently, it trades right at 1850 supported by the 50-MA at 1810 and 100-MA at 1800. The Moving Averages are aligned in an ascending formation being another element that suggests further upside. Is it likely to be the case? Let’s find out.
Analysis
Fundamentals
Gold normally rises on negative news. What are they? First, it’s coronavirus. Infection rates are becoming increasingly worrisome in Asia as dynamics appear to be getting worse. Second, global geopolitics: US/Europe-China tensions are gaining momentum. Third, weak US economic data: on Friday, retail sales and industrial production resulted to be less than expected. Among these factors, the first and the second one are of mid-term and long-term effects, and hence, will stay pushing the gold price. In the meantime, the third one may be responsible for the most recent upswing. Also, Elon Musk’s critique of Bitcoin may indirectly create more funds inflow into the gold market: some investors must have changed their mind trading crypto as they observe prices go into turbulence each time Tesla’s CEO makes another tweet or comment.
Technicals
The long-term view suggests that the current level is of high importance. It gets perfectly aligned with the highest highs since last August: this downtrend has been dominating the picture for almost a year until now. The 200-MA is exactly at 1850 which is where the price is challenging the border of the uptrend.
That means that, first, the resistance at the current level is very high: a U-turn followed by a bearish reversal is very possible. If that happens, the large trend it’s been in until now will stay largely intact. In this case, gold may go down all the way to 1700 in a new big downswing.
On the other side, if 1850 is broken, it may turn out to be relatively easy for gold to reach 1900 and challenge the double-top high of 1950. If the latter takes place, the multimonth trend may be considered broken, and gold will largely find itself in an uncharted territory around the all-time highs of 2000-2050.
Recommendations
Tactical
Beware of a false breakout possibility and allow enough time for the gold price to stay above 1850 if it breaks this level.
Local
Use H4 and H1 timeframes to spot possible reversal chart formations and detect bearish return and a formation of a new downswing.
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