Quick Profit in Gold – Brace for a Buying Position
Arslan Butt • 2 min read
On Monday, the yellow metal gold prices slipped around 1%, falling from 1,513 to 1,498 during the Asian and early European session. The foremost reason behind such a dramatic bearish trend is the stronger US dollar and a recovery in stock markets. Signs of further stimulus from major central banks around the world dampened anxieties about a recession.
The risk sentiment shifted to risk-on after the POTUS (President of the United States) Donald Trump said that he doesn’t see a recession on the horizon after a volatile week for markets.
“I don’t think we’re having a recession,” Trump told reporters. “We’re doing tremendously well. Our consumers are rich. I gave a tremendous tax cut and they’re loaded up with the money.”
The dollar index, against a basket of six major currencies, floated near a two-week high on Friday, making greenback-denominated gold more expensive for foreign investors holding other currencies.
For the same reason, global stock markets turned bullish, especially after China’s central bank changed a key interest rate, which is seen to reduce borrowing costs for companies. Cheaper costs of borrowing may bring more investments in the corporate sector, which is why we saw investors entering the stock markets.
Gold – XAU/USD – Technical Outlook
On the technical side, gold is trading mostly bearish, maintaining the sideways channel of $1,526 – $1,495. On the 3-hour chart, gold has formed “Three Black Crows” which are keeping precious metal under selling pressure.
Stochastics and RSI are likely to enter the oversold zone and at the same time, gold is approaching strong support level of 1,495.
Closing of candles above 1,495 may help us capture a bullish reversal in gold, elsewhere, the bearish breakout can trigger sell-off until 1,491 and 1,481.
GOLD – XAU/USD – Trade Idea
Consider staying bearish until 1,495 and bullish above the same level to capture buying until 1,500 and 1,510.