Should I invest in Gold 1 OZ (XAU=X)?

Should I invest in Gold 1 OZ (XAU=X)?

The price of gold has risen 20% year-to-date. Economic anxiety is running deep and financial systems are exceedingly fragile. This is boosting the price of gold to be the safe-haven asset to own.

When the stock market crashed in March, the gold price also fell. This surprised many investors who would have expected it to rally in response. However, many of those investors that buy gold will also be invested in equities, and it’s possible that they were selling their gold to meet the margin demands on their falling shares. Investing in gold isn’t a bad idea to diversify a portfolio and hedge against traumatic periods. Just keep in mind it comes with its fair share of price fluctuations and risk too.

Shayne Heffernan Trade Idea

“People have bought the dip. Even in the best of circumstances, we are still in an environment where (interest) rates are going to remain very low, fiscal policies are going to remain very accommodative and inflation is going to be high.”

“Gold is poised to move higher in the longer term and investors are trying to get their hands on the metal before it rockets higher, there is a lot of technical support around the $1,700 level.” Shayne Heffernan PhD in Economics

Why This Matters

Massive stimulus measures tend to support gold as it is used as a hedge against inflation and currency debasement.

Gains in bullion were limited, however, as the dollar firmed and Asian shares rose, with investors looking ahead to more countries restarting their economies, even as some reported an unwelcome pickup in new coronavirus cases.

Chinese authorities reported on Sunday what could be the beginning of a new wave of virus cases in northeast China, while South Korea warned of a second wave of new infections.

Highlighting the impact of the pandemic, the U.S. economy shed a record 20.5 million jobs in April, a Labour Department report showed on Friday.

Americans should not expect a quick return to growth, U.S. Federal Reserve officials said last week.

On the U.S.-China trade front, the International Monetary Fund on Friday warned Washington and Beijing against rekindling a tariff war that could weaken recovery from the pandemic, while signalling a possible downward revision of global economic forecasts.

Technical Indicators

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

The projected upper bound is: 1,785.76.

The projected lower bound is: 1,629.36.

The projected closing price is: 1,707.56.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 28 white candles and 22 black candles for a net of 6 white candles.

An inverted hammer occurred. If this occurs during a downtrend it implies a reversal. Look for a confirmation of the reversal on the bar.

A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).

A shooting star occurred (a shooting star has a small real body near the bottom of the candle and a long upper shadow). During an uptrend(which appears to be the case with PREC.M.XAU=) the long upper shadow indicates that the bears are gaining control and a top may occur.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Momentum Indicators

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.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 68.2223. This is not an overbought or oversold reading. The last signal was a sell 9 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 54.67. 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 buy 36 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 7. This is not a topping or bottoming area. The last signal was a sell 11 period(s) ago.

MACD

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 up 4.612 at 1,705.262. Volume was 8,900% above average (trending) and Bollinger Bands were 58% narrower than normal.

Open        High        Low        Close        Volume
1,702.390   1,712.301   1,701.900  1,705.262    19,558
Technical Outlook
Short Term:         Neutral
Intermediate Term:  Bullish
Long Term:          Bullish
Moving Averages: 10-period       50-period        200-period
Close:           1,701.46        1,647.74         1,549.97
Volatility:      20              31               20
Volume:          1,956           391              98

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.

Summary

PREC.M.XAU= is currently 10.0% above its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods.

Our volume indicators reflect very strong flows of volume out of XAU= (bearish). Our trend forecasting oscillators are currently bullish on XAU= and have had this outlook for the last 25 periods.

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