Gold’s weekly outlook: Nov 09-13

Gold finally had a breakout from the range it had got stuck in since last 5 weeks on the back of a lower dollar mainly though many other reasons attributed to its rise as well. With U.S presidential elections out of the way though Donald Trump hasn’t yet conceded formally and is taking a legal route to salvage/make up lost states, it seems pretty clear that the Democrat contender Joe Biden has won with quite a margin and his victory in itself has raised an unequaled amount of uncertainty as its obvious from his mandate/speeches that he will overturn most of the decisions/policies instated by the Trump administration be it geopolitical or fundamentals keeping the world on toes again. Not going into politics much since its a drama of its own, the absolute state of the world remains fragile with new cases hitting milestones almost everyday which is a matter of concern as the 2nd wave of the pandemic looks more brutal than first given the fatalities and the speed of spread though historically the 2nd wave generally is less damaging so again a confusion generator. Economic data is still not confirming the ongoing effect of the coronavirus hit growth as it continues reflect recovery which also may just be an eyewash. With winter almost knocking at the door, countries will find it really hard to battle the pandemic which generally worsens even more in such climatic conditions. Lastly on vaccine front there remains no confirmation of any nor any in consideration for FDA approval, thus the economic outlook remains grim and this should bode well for the yellow metal. To watch next week – Brexit endgame and other important economic data.

On the chart –

Gold had a big green bar after many weeks which not only broke the consolidation/triangle pattern but also closed above $1950s after a gap of 6 weeks. This move not only wiped out weak hands (as the retail trap was successful) but also placed gold into a highly bullish trend on technical aspect which had gone missing even as fundamentals were lending really strong support to the price. The breakout was long awaited which now should remain a clear case for new highs and with dollar still pursuant in breakdown the shine is back for gold. We have 2 scenarios –

1. Gold closed above the support, till this is held it can go to $1963. If this is crossed it can move towards $1989. And if this is taken out it can rally to $1208.

2. Bearish bets remain out of the scene given the breakout except scalp trades.

Bullish view – Bulls emerged out of the consolidation stronger than ever pushing the price back above the previous highs ($1921) as dollar continued to fall. A significant rise in uncertainty also contributed to the length of the green bar as the virus cases continue to rise auguring fears of a total lockdown again as partial or region specific ones are not that effective in curbing the spread. Also the change of presidency in U.S remains a huge cause of concern given its earlier drawn implications and the mandate of the voted president-elect Joe Biden which suggests most of the policies/decisions of the Trump administration will be overturned sending shockwaves to the global economy again. Until last week’s move gold was fundamentally buoyed to a great extent but now the technicals have gained more light as the pattern/consolidation breakout suggests a fresh leg of upmove which should lead the price to a new high and also this move/breakout allows gold to resume the rally towards $2700 plus.

Bears remain cornered post such a bullish breakout.

On larger terms, gold continues to remain bullish and prices are expected to head higher.

Possible trades are on both sides but mainly on upside, gold can be bought above $1963 for the targets of $1989 and $2008 with a stop loss placed below $1951. Longer term target $2033.
Dips towards support (and breakout region) can be used to create longs for the above mentioned targets.
Shorts can be useful for scalp trades only.