Gold Bulls Look To Hold The Breakout And Use Weakness As A Chance To Buy

Gold Bulls Look To Hold The Breakout And Use Weakness As A Chance To Buy

Hantec Markets  | Jun 29, 2020 10:11

Trading outlook:

Safe haven positioning has boosted gold recently. With fundamental correlations beginning to align and technicals increasingly positive, the outlook for additional gains is improving. We look to use near term weakness as an opportunity to buy gold for further multi-year highs.

Fundamentals/Newsflow

With the emergence of second wave infections of COVID-19 around the world, risk appetite has turned increasingly cautious recently. The is reflected in falling bond yields and sliding equities. Gold, as a safe haven asset, seems to be a beneficiary of this.

The charts below show how correlations for gold with Treasury yields (the US 10 year Treasury yield) and equities (E-mini S&P futures) have become increasingly negative recently.

US 10 Yr Yield Daily Chart

S&P E-mini Futures Daily Chart

What is also interesting is that with the United States being significantly impacted now by rising infections, with some states re-engaging lockdown procedures, the dollar is failing to see the benefit from this safe haven flow. As gold has been edging higher in the past week and a half, the dollar has failed to do so. This will be playing into the potential for gold to rally.

USD Daily Chart

The relative performance of majors show three interesting clusters of performance over the past two weeks. The safe haven asset plays are dominating. Leading the way is gold which is closely followed by silver, with both significantly outperforming. The yen and Swiss franc are the next cluster, mildly outperforming the dollar. Then we have the higher risk commodity currencies which are underperforming (along with a near term corrective euro). Finally, we have sterling which seems to be finding a next level of underperformance, way down at the bottom. This all points to being weighted in safe havens right now, with gold being the best performer.

Rebasing

Our long term position on gold has been bullish for a while. It has taken some time to break higher from the medium term range, and even then, this move is not decisive yet. With gold being underpinned by ultra loose global monetary policy for many months (and possibly years) to come, this will keep real yields subdued/negative. This is a good environment to be buying gold in. Although we still believe the path to upside may be bumpy, this will also provide opportunities too.

Support

  • $1752 – 3 week uptrend support
  • $1744 – important pivot of lows and highs ( between $1744/$1747)
  • $1736 – 18th June old high

Resistance

  • $1775 – Intraday high, 29th June
  • $1779 – 24th June multi-year high
  • $1795 – 2012 high

Technical Analysis

Once more we see gold edging higher through resistance but without decisively making the breakout. It is a similar move to the one we saw back in May, where the market moved through resistance to multi-year highs, only to struggle to sustain the traction. This time, we have seen a breakout through $1764 which lends the positive bias, but it is still tough going for the bulls, with some conflicting candlesticks in the past few sessions.

However, there is now a well-defined uptrend that has developed in the past three weeks which is rising around $1751 today. The support is developing around $1744/$1747 from old June highs, which would point to$1744/$1764 now being an area to look for long opportunities.

One of the more significant improvements that has developed in the past week has been the return of a more positive momentum configuration, where Stochastics are consistently holding above 75, RSI holding above 60 and MACD lines rising for the first time since late April.

With the market a shade lower today, we look to us near term weakness now as a chance to buy for moves towards $1795 (the 2012 high) and beyond. A close below $1744 would defer this strategy, whilst a failure of the $1720 pivot would see the bulls losing their control of the market.

STRATEGY: A closing breakout above $1764 has opened a test of $1795/$1800. Given the frequent bull failures in recent months, there is still a degree of caution over the strength of the breakout, but we are happy to back long positions. Below $1744 would now question the bull control, whilst below the old $1720 pivot support would lose bull control again.

XAU Daily Chart

XAU Hourly Chart

"""DISCLAIMER: This report does not constitute personal investment advice, nor does it take into account the individual financial circumstances or objectives of the clients who receive it. All information and research produced by Hantec Markets is intended to be general in nature; it does not constitute a recommendation or offer for the purchase or sale of any financial instrument, nor should it be construed as such.

All of the views or suggestions within this report are those solely and exclusively of the author, and accurately reflect his personal views about any and all of the subject instruments and are presented to the best of the author’s knowledge. Any person relying on this report to undertake trading does so entirely at his/her own risk and Hantec Markets does not accept any liability. """

Original Post

Hantec Markets

Related Articles

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Wasif Khan
Wasif Khan

nice  ... (Read More)

Jun 29, 2020 19:15 GMT· Reply
Discussion
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (India) English (Canada) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 简体中文 繁體中文 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
NoYes
CancelYes
Saving Changes

+

Download the App

More markets insights, more alerts, more ways to customize assets watchlists only on the App

Investing.com is better on the App!

More content, faster quotes and charts, and a smoother experience is available only on the App.