Gold verging on confirmation uptrend has resumed
Tony Sycamore June 22, 2020 1:55 PM
The first half of June was notable for the optimism that surrounded the post-COVID-19 lockdowns and the gradual re-opening of economies. However, 2020 has not been your typical type of year.
Following a surge in new cases in countries including the U.S., China, Germany, South Korea, and Australia, optimism has been replaced by some caution around whether the latest outbreaks can be contained. Or if they are the onset of a “forest fire of cases” as one infectious disease expert in the U.S. has warned.
The possibility of a second wave casts shadows over the much sought after V-shaped economic recovery. As highlighted by comments over the weekend from Boston Fed President Rosengren who said that a second wave would impact the potential for a sound second-half economic recovery and would require more fiscal and monetary support.
The uncertainty created by the second wave and the prospect of more fiscal and monetary support is supportive of the macro narrative surrounding gold, and after a rally this morning, gold is on the verge of confirming that its uptrend has resumed.
As viewed on the chart below, apart from the brief spike to the $1765 high in mid-May, gold traded sideways between $1660ish and $1750ish for the better part of 2 months. The bounce from the key $1660 support area negated our call for a deeper pullback that we wrote about here.
This morning’s break above the top of recent range highs $1745/50 provides some encouragement the uptrend has resumed. Should gold now break and post a daily close above $1765, it would confirm the uptrend has resumed.
In this context, we favour opening a small long gold position, following this morning’s break above $1750, leaving room to add on a break and close above the $1765 high. The stop loss should be placed initially below $1715 and would then be raised to $1735 should gold trade near to $1785. The target is a move to $1800 and then $1850.
Source Tradingview. The figures stated areas of the 22nd of June 2020. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.