GOLD UPDATE – 28 June 2021

Gold is now consolidating between 2 price levels, between the highs and lows of the 18 June candle, $1761.0-1797.3.  The 100 Day Simple Moving Average is acting as resistance, but conversely, price is also being supported at a confluence of Fibonacci and support levels.  While we are generally bearish on the gold price, we would like to see price break out of this range before we get a clearer idea whether to go long or short. 

The moving averages on the Daily chart show bearish gold prices, with gold currently lying below the 50 Day (red line) / 100 Day (green line) and 200 Day (orange line) Simple Moving Averages (SMA).  In particular, the 100 Day SMA (current reading is 1793.5) is now providing some level of resistance – price has not been able to close above that level once it crossed below it on 17 June. 

However, we are now also at a crucial juncture – we may have a bullish “Golden Cross” if the 50 Day SMA (currently at 1834.0) closes above the 200 Day SMA (1834.1).  The last time we had a Golden Cross was 16 Jan 2019, when gold closed the day at $1293.7, eventually hitting a high of $2075.3 on 7 Aug 2020. 

We would consider buying gold if we see a Golden Cross accompanied by a close above the 100 Day SMA.

GOLD DAILY CHART

On the Weekly chart below, we can see that there is a confluence of 2 important Fibonacci levels around the $1763-1766 area (the 38.2% retracement of the 2019 low to 2020 high, and the 50% retracement of the 2020 low to high.  We also have a 61.8% retracement of a 3rd, minor Fibonacci level, which we have not shown in the chart to avoid confusion). 

Previously on 30 Nov 2020, price bounced off these levels when it made a low of $1764.6.  The 18 May high of $1765.3 was a previous resistance level that has since turned into a level of support.  The recent weekly low of $1761.0 (14 June) found some support near those levels.

We would consider shorting gold if we see price closing below $1760 on the Daily chart.

GOLD WEEKLY CHART

Some additional points to consider:

  1. Bearish divergence – falling bond yields, falling gold prices – the price of gold is usually inversely correlated to bond yields.  When bond yields are low and/or are falling as they have been over the past 3 months, the opportunity cost of buying gold (which offers no interest) is low, which encourages buying of gold.  Currently, we have falling bond yields, but falling gold prices as well, which signifies that the gold market is weak.
  2. Rising US Dollar – the price of gold usually has an inverse correlation with the USD.  The recent bullishness in the US dollar since the last FOMC meeting of 16 June is bearish for gold.
  3. Bullish seasonality coming in the 3rd Quarter of the year – gold usually sees a bottom around June/July, before rallying strongly into September.