Last week Gold saw a drop bigger than -6%, which got a lot of investors thinking that a stronger sell-off may be starting. So should Gold buyers worry? In my opinion not (yet) and I will explain why.
** The long-term Bullish Channel is still intact ** As you see on the chart, Gold remains within its long-term Bullish Channel that started after the August 2018 bottom ($1160) and got confirmed after breaking the (former) $1400 Resistance that was holding since 2014.
Excluding the March 2020 break downwards (which was caused by the COVID melt-down) and the July 2020 break upwards (which was caused by the stimulus hopes), this bullish Channel has been pretty consistent. In fact its last Low on November 30, 2020 has been on its Higher Low trend-line. Not only that but that Low took place on the 1W MA50 (as seen on the chart below that I posted on November 30), which has been holding since December 2018 and every contact with is a long-term buy opportunity.
So as long as this trend-line holds, the long-term bullish trend should be preserved. Back to our current chart, which is on the 1D time-frame. As you see, we currently have an MA50/ MA200 squeeze (black arrows). Last two times this happened (May 30, 2019 and December 23, 2019), Gold rallied aggressively.
** The role of the MACD and RSI ** It is important to note here that the 1D MACD just made a Bearish Cross. As you see on the chart, every time the MACD makes a Bearish Cross and turns lower, Gold enters a shor-term consolidation phase (green rectangle on the chart). Special case was the case even during the 2nd August irregularity when the price turned sideways after the MACD Bearish Cross but then never recovered (even till now) that high and instead dropped lower (but it can be argued that it just corrected itself after the irregularity back into the Channel Up). But in all other 3 instances, a new High followed the consolidation.
In my opinion the current phase is more similar to the April 2020 Bearish Cross. The RSI shows us something interesting here. In both cases it rebounded after it roughly touched the 30.000 (RSI) level and then after a roughly 70.000 top, it dropped back to the 41.000 level. A strong rebound followed. This is where the RSI is today, even though this time the 41.000 pull-back came earlier.
** The Death Cross that we should avoid ** I need to point out, that the pattern which would signal a long-term trend change would be the 1D Death Cross. That is when the MA50 (blue trend-line) crosses below the MA200 (orange trend-line). That could be devastating for Gold bugs. To put it into perspective, last time a Death Cross occurred on the 1D time-frame was on June 22, 2018 (see chart below):
What followed after that was a sharp 2-month sell-off of around -9% that made Gold's last known bottom at $1160. A similar sell-off would drop the price close to the $1650 mark. So far that looks less likely, but I would like to read your thoughts on that. Do you think that Gold's long-term bullish trend is intact, or the trend has started shifting to the downside?
Please like, subscribe and share your ideas and charts with the community!
Gold and Silver were too easily frightened by the DXY spiking to 90+. It all depends on DXY will the DXY resume its downward path or has it bottomed and now will start upwards, and that then will mark the demise of Gold and Precision Metals. What do you think the DXY might do
CryptoSurfer007
⋅
@TradingShot do you think some of this price action is Gold selloff into BTC??
UnknownUnicorn3382580
⋅
ARESABI
⋅
Great analysis! This looks more like a fakeout to me but i'll definitely wait before taking any position on gold.
SmileR2020
⋅
I have been looking for the reason for this severe drop over the weekend and I think I have found it...It is not related to bonds or the dollar index...this sell off was too much ......On Friday one of the news media outlets announced that one of the democrats would not support Biden's proposed 2000 dollar stimulus pay cheques to US citizens.....This spooked the stock markets....This statement was corrected around 7pm gmt to that he was supportive but that fighting the virus was a priority....The markets turned back up right at this point..including gold....The indices got back up quicker granted....If gold drops under 1800 next week, there is something seriously wrong with this market...I think gold will rise again next week...I bought back in at 1840 long on Friday evening...stoploss to entry before close...not taking any chances...best of look
ShortInTheTooth
⋅
My sentiment for 2021 is bullish as well, but not at such a sharp angle to the upside. It flew too close to the sun, hence the Friday fall. Like you suggested, I think we're going into a consolidation period to rally later on.
Aaronroberts666
⋅
@ShortInTheTooth, do you think it will go back to 1900s this week ? Or mayb drop to the 1700 ?
shakeout, the long term charts still look fine. excellent buying opportunity at 1705 should it get down there
ilesanmipepsi
⋅
I think the trend has started to shift, in fact I shorted GOLD at the very top of this weekly candle. The reason is because the last time there was a death cross signalled by this indicator, the candle which has the arrow closed bearish, so as soon as I spotted the same fractal forming I shorted GOLD despite the fact that this week candle that has the arrow was still very much bullish. And eventually, it closed bearish. In conclusion, we can compare this indicator death cross to that of the MA you pointed out on the Daily chart because it will definitely happen. And we can expect the same movement then, now.
Below is the current death cross:
And this is the previous death cross:
However, I still think GOLD will see a sharp buy after it changes trend again to the upside.