For the past couple of weeks, Gold has been dropping like a rock and this has got me thinking that there could be further movement to the downside for the next couple of weeks to come if not months.
In this post, I'm going to give my analysis of why I think selling Gold will be a good trade. Before i proceed any further, let me emphasize that this is just to give you an idea of how things are likely to play out and
that this post is not a trade recommendation. This post is going to be in two phases; the fundamental outlook and the technical outlook.
Now from a fundamental perspective, Gold has an inverse relationship with the U.S dollar. What this means is that when the U.S dollar rises, Gold tends to drop. This is so because Gold is priced in U.S dollars
and when the U.S dollar becomes strong, it makes buying Gold expensive. Very simple as that. You might probably know that the Federal reserve has signalled to the markets that it plans to increase interest rates at
least twice this year which has caused massive capital inflows into the U.S dollar. Now the strength hasn't been just because of the Federal reserve but also trade tensions. Market participants are looking at the Dollar
as a safe currency to hold in these times. All of this has resulted in the strength of the U.S Dollar.
From a technical perspective, the XAU/USD pair (Daily timeframe) is hovering around the weekly support of 1194.80. A break below this level will see the pair(XAU/USD) drop further to 1142.0000 -1140.00 region.
For now all we have to do is wait and see how price will perform. I hope this has given you some insight. See you soon with another post.
In this post, I'm going to give my analysis of why I think selling Gold will be a good trade. Before i proceed any further, let me emphasize that this is just to give you an idea of how things are likely to play out and
that this post is not a trade recommendation. This post is going to be in two phases; the fundamental outlook and the technical outlook.
Now from a fundamental perspective, Gold has an inverse relationship with the U.S dollar. What this means is that when the U.S dollar rises, Gold tends to drop. This is so because Gold is priced in U.S dollars
and when the U.S dollar becomes strong, it makes buying Gold expensive. Very simple as that. You might probably know that the Federal reserve has signalled to the markets that it plans to increase interest rates at
least twice this year which has caused massive capital inflows into the U.S dollar. Now the strength hasn't been just because of the Federal reserve but also trade tensions. Market participants are looking at the Dollar
as a safe currency to hold in these times. All of this has resulted in the strength of the U.S Dollar.
From a technical perspective, the XAU/USD pair (Daily timeframe) is hovering around the weekly support of 1194.80. A break below this level will see the pair(XAU/USD) drop further to 1142.0000 -1140.00 region.
For now all we have to do is wait and see how price will perform. I hope this has given you some insight. See you soon with another post.