Gold reaffirms its position of "safe heaven"

In the current financial landscape, gold continues to emerge as a resilient asset, demonstrating impressive growth year to date. With an 11% increase in value thus far, gold's performance surpassed last year's modest 1.3% gain during the same period. This remarkable appreciation can be attributed to a combination of multiple factors, including economic uncertainty, inflationary pressures, and investor sentiment. As the world grapples with these challenges, gold continues to solidify its position as a safe haven for investors seeking stability and a hedge against financial turbulence. Moreover, the ongoing strength of this precious metal reaffirms its enduring appeal as a strategic investment choice in an unpredictable global economy.

While we maintain a bullish stance on gold in the long term, we must also consider the potential impact of stock market fluctuations on gold prices. As seen in previous instances, a weakening stock market can weigh on the price of gold, much like it did last year. With this in mind, we believe it would be prudent for investors to wait for a significant pullback in the price before adding more to their positions.

In our previous article, we highlighted the deviation of gold's price from its 50-day Simple Moving Average (SMA), which could have foreshadowed a retracement toward this indicator. Since then, the price has remained highly volatile, yet it has failed to retrace toward the 50-day SMA; in fact, the price and 50-day SMA have been gradually closing this gap. Nevertheless, we will continue to closely monitor key metrics, such as the 50-day and 20-day SMAs, along with trading volume, which has been declining since May 4th, 2023, when gold nearly broke above an all-time high. The decreasing volume is not particularly bullish and puts us on high alert.

Illustration 1.01

Illustration 1.01 shows the daily chart of XAUUSD. The red arrow shows declining volume since 4th May 2023.

Technical analysis
Daily = Neutral
Weekly = Bullish

Please feel free to express your ideas and thoughts in the comment section.

DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.

Comment:

Correction to the title's typo "Gold reaffirms its position as a safe haven."

Trade active:

Gold slumped toward $1,970 per ounce. More weakness is not ruled out. We continue to wait before accumulating more gold.