Gold Forecast: Will Gold join the USD as a safe haven?

2018年12月16日

It’s gonna be a slightly longer article and if you are not a midterm trader, you’d better scroll down to the technical part.

What Gold Bulls need: A weaker U.S. dollar, lower U.S. inflation-adjusted real yields, and volatility in the equity space. If there’s a slowdown in U.S. economy, a slowdown in the equity market, and continued geopolitical risk, there’s nothing than Gold that really stands out as your go-to safe-haven place.

However, the US Dollar has taken safe-haven attention away from Gold and Silver.

Some analysts think that the U.S. dollar has likely peaked in 2018 and Gold is expected to trade north of the critical 1.300 $ resistance level next year.

Next week, I will publish a forecast for Gold 2019 with Bulls, Bears, Base-Case Scenarios.

After a disappointing year, gold is looking to recover and make new gains in 2019, with the help of dovish comments from FED members. The 1below the expectations” Non-Farms Payroll release last Friday, coupled with a weakening stock market, has the market expecting the Fed will turn cautious next week and slow the pace of rate hikes in 2019.

Meanwhile, we are also seeing safe-haven bids coming into the miners, led by sector bellwether and the world’s largest gold miner Barrick Gold (ABX). Insiders have been recently buying shares in the open market and the stock is attempting to break-out of a year-long base. When gold stocks are forming a major bottom, the global miners and royalty firms generally lead and the juniors follow shortly thereafter.

A large part of future U.S. dollar moves will depend on the level of hawkishness or dovishness of the Federal Reserve and the markets will look for a clear sign in the FOMC statement and Powell’s speech on Wednesday. If the Fed chairman indicates a pause in the rate hiking cycle now, a decline in DXY and Dollar Sell-off may start which would help Gold’s recovery.

The Fed has a difficult predicament to contend with regarding the current dot-plot. On the one hand, they need to keep moving rates higher to try and avert a massive pension crisis building in the state and municipal levels. On the other hand, lobbying is growing intense for the Fed to pause with stock markets in turmoil due mostly to a rising U.S. dollar squeezing global debt, as much of this debt is denominated in the world’s reserve currency. “Shortly; the strong USD is killing the stock markets. Stop the rate hikes”. The FED’s choice will determine the direction of Gold Prices.

Another component of the matter is the political turmoil in Europe. The deadline for a BREXIT deal is March 29, 2019 and Italy’s budget battle with Brussels remains a concern as well. With a growing lack of confidence in Europe, more safe-haven bids may continue into both gold and the U.S. dollar. And it looks like investors walk toward USD instead of Gold as a safe haven so far.

Technically:

I have published 2 short trade ideas before and they both reached the first targets. ( Bearish Butterfly Pattern and Intraday Trendline Breakout) - see attached -

On the daily chart, Gold is trading on an ascending bullish trendline. XAUUSD ended the week at 1238 $ above EMA 50 and positive territory of the Ichimoku Cloud. So we can say the short-term trend is still Bullish.



Key Levels on The Daily Chart:

*1252 – SMA 200 on Daily Chart

*1265 – SMA 100 on Weekly Chart

The midterm bearish trend will remain as long as the prices stay below 1265 $. A few daily closing above 1265 $ will be the signal of the midterm trend reversal from bearish to bullish. In this case, we can start to talk about 1281, 1296 and 1300. I do not think that the big hedge funds will invest in Gold below 1265 $. ( Since we reached the year-end, funds’ positions may create a volatility in Gold prices next two weeks )

On the H4 Chart, Gold ended the week at 1238 the bearish territory below EMA 50. Technical readings indicate the continuation of the bearish move.

On the downside, we have 2 key levels 1230 $ and 1226 $. I believe that the potential breakout of 1226 $ will call the bears back to the arena with much more appetite sending the prices 1218 $ and 1210 $.

What is my plan: I will keep my short positions – my stop loss at the entry 1250 $ – targeting 1226. I will add short positions if the prices break below 1226 $ and my targets will be 1218 and 1210. If the FED does not sound like soft dovish as market participants are expecting, we may see the prices breaking key support at 1210 $ and heading South towards 1.178 and 1.150 $

Any potential intraday/midterm trade idea will be published for the members.