Gold had its worst week since March, falling some 4.6 percent from the previous Friday, as the U.S. dollar staged a rally against the euro. The price of bullion closed below $1,900 an ounce last Wednesday for the first time since July 23 and is now down about 10 percent from its high of $2,075, putting it in correction territory.
I’ve already seen numerous headlines questioning whether this is the end of the gold rally. Hardly. As I’ve explained many times before, corrections such as this are normal and healthy. They’re a part of gold’s DNA of volatility. During the monster rally of the 2000s that culminated in gold hitting its previous record high of $1,900, there were several significant pullbacks, some of them exceeding 20 percent.
Take a look below. Gold is now more oversold on the short-term, 10-day relative strength index (RSI) than at any other time since the golden cross took place in January 2019. The last time the precious metal was this oversold, in mid-March, gold fell below not just its 50-day moving average but also its 200-day average. We’re not quite there yet—gold is trading below its 50-day but still well above the 200-day—but had you bought the March dip, you would have seen your position increase 40 percent over the next five months.
Looking at a longer-term period, gold doesn’t yet appear to be oversold. The oscillator chart below is based on the daily gold price over a rolling 60-day period, which is equivalent to a three-month quarter. As you can see, gold has recently fallen out of overbought territory and is returning to its five-year mean, or average price. It’s important to remember that for the 60-day period, a move of one standard deviation is equivalent to 10 percent. In other words, the price of gold needs to change by 10 percent to record a move of one standard deviation.
Biggest One-Day Inflows into Gold-Backed ETFs
With real rates still negative (and likely to remain that way for some time longer), and unprecedented money-printing threatening to heat up inflation, I believe it only makes sense to buy the dips at this time.
That’s exactly what many investors did earlier last week. On Monday, when the yellow metal fell nearly 2 percent, investors added 1.2 million ounces to ETFs backed by physical gold. That was the most for a single day in 2020.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 1,980.17.
The projected lower bound is: 1,817.14.
The projected closing price is: 1,898.65.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 77.7574. This is not an overbought or oversold reading. The last signal was a sell 0 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 45.98. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 38 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -12. This is not a topping or bottoming area. The last signal was a buy 3 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 10 period(s) ago.
Rex Takasugi – TD Profile
PREC.M.XAU= closed down -6.349 at 1,898.700. Volume was -0% below average (neutral) and Bollinger Bands were 2% narrower than normal.
Open High Low Close Volume 1,904.890 1,916.760 1,888.790 1,898.700 0
Technical Outlook Short Term: Neutral Intermediate Term: Bearish Long Term: Bullish
Moving Averages: 10-period 50-period 200-period Close: 1,887.12 1,945.56 1,735.19 Volatility: 20 27 23 Volume: 0 0 0
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
PREC.M.XAU= is currently 9.4% above its 200-period moving average and is in an downward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods.
Our volume indicators reflect very strong flows of volume into XAU= (bullish). Our trend forecasting oscillators are currently bearish on XAU= and have had this outlook for the last 28 periods.