$XAU #Gold #Commodities #FX #Trading #Markets
As COVID-19 uncertainty drives the price of gold higher, the precious metal has solidified its reputation as a “safe haven” stock.
Yet, after gold hit its all-time high of more than US$2070 per ounce (roughly A$2847.08) in early August, the spot price of the metal has been trending largely sideways ever since.
It seems despite the ongoing spread of the coronavirus, the spotlight has been thrown off of gold and onto tech.
The world’s top tech players, such as Apple, Microsoft, and even Australian fintech darling Afterpay, staged a stellar rally after the March slump until the bubble burst and the tech world went through a major correction over the past week.
This has largely set the tone for global markets over recent trading sessions, and not even gold have been able to escape the ripple effect.
This begs the question: has the outlook for the yellow metal changed in light of the big tech swings?
Firstly, it’s important to understand why gold has been so solid while markets scramble to survive the pandemic.
The driving force behind gold’s performance in times of economic turmoil is the fact that gold will always have a buyer.
Sellers have their pick of junk bonds and stocks to dump to stay financially stable if they find themselves in a pickle. However, in an economic crisis — such as once-in-a-lifetime global pandemic — buyers for stocks and bonds are far and few between.
This spurs a sudden sell-off of gold as investors panic, sending the spot price of the metal into a slump. However, bargain hunters then pick up the metal at its cheaper price and the price surges once more.
This happened in the 2008 Global Financial Crisis (GFC), and the pattern was repeated in the COVID-19 pandemic.
The spot price of gold bottomed out under US$1500 per ounce in March, but surged just days later.
Despite gold’s general resistance to wider market influence, the metal’s spot price followed the general movements of the world’s biggest tech index over the past week.
The Nasdaq and the price of gold both started September strong, but dipped over five trading sessions before moving slightly higher the most recent session.
The world’s biggest “stay at home” stocks were all struck major blows. In a matter of days, Apple’s share price retreated almost 16 per cent. Microsoft slumped 12.5 per cent. Alphabet, which runs Google, lost more than 11 per cent. Zoom nosedived 23 per cent.
What’s more, nothing seemed to cause the sell-off outside of general market panic about bloated valuations.
And this could be the reason gold has followed tech’s trend; renewed market uncertainty is causing a repeat of the price movements from March, albeit on a smaller scale.
Tech’s correction has renewed economic fears, prompting the fall in gold as weak hands cash out. Of course, this will, in turn, create a new buying opportunity for strong hands.
UBS, the world’s biggest wealth manager, certainly seems to think gold has further to run. According to Business Insider, UBS senior portfolio manager Charles Day said though gold’s rally has paused, it’s still a good idea for investors to allocate around 10 per cent of their portfolio to the precious metal.
This comes after big banks advised the ultra-wealthy of the world to hold up to 10 per cent of the portfolio in gold back in June. Most private banks recommended only a tiny amount of gold holding before the COVID-19 crisis.
Overall, the bias in prices is: Upwards.
The projected upper bound is: 2,022.58.
The projected lower bound is: 1,864.68.
The projected closing price is: 1,943.63.
A black body occurred (because prices closed lower 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 32 white candles and 18 black candles for a net of 14 white candles.
An engulfing bearish line occurred (where a black candle’s real body completely contains the previous white candle’s real body). The engulfing bearish pattern is bearish during an uptrend. It then signifies that the momentum may be shifting from the bulls to the bears.
If the engulfing bearish pattern occurs during a downtrend (which appears to be the case with PREC.M.XAU=), it may be a last engulfing bottom which indicates a bullish reversal. The test to see if this is the case is if the next candle closes above the bottom the current (black) candle’s real body.
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 74.6052. This is not an overbought or oversold reading. The last signal was a buy 3 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 50.21. 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 23 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 9. This is not a topping or bottoming area. The last signal was a sell 7 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 23 period(s) ago.
Rex Takasugi – TD Profile
PREC.M.XAU= closed down -13.752 at 1,940.318. Volume was 8,900% above average (trending) and Bollinger Bands were 38% narrower than normal.
Open High Low Close Volume 1,954.200 1,957.108 1,937.070 1,940.318 17,151
Technical Outlook Short Term: Neutral Intermediate Term: Bearish Long Term: Bullish
Moving Averages: 10-period 50-period 200-period Close: 1,944.63 1,919.49 1,703.18 Volatility: 12 26 23 Volume: 1,715 343 86
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 13.9% above its 200-period moving average and is in an downward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future.
Our volume indicators reflect very strong flows of volume out of XAU= (bearish). Our trend forecasting oscillators are currently bearish on XAU= and have had this outlook for the last 13 periods.
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