Gold neutral

Gold market is calm, for how long?

08 april 2022 111
Volkov_Anton
Volkov_Anton

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2nd in the segments "Indices", "US stocks" and "Metals"
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Gold market is calm, for how long? 

 

When the annual maximum had hit on March 8 (near of the historical peak of 2074), the quotations of gold immediately rolled back. The stable trend is still not formed, the price dynamics became flat. Where can the price for the gold turn in shortly?


The lack of an obvious trend for gold explains the several factors which currently balance each other. 


The growing geopolitical tension in the world indicates the rise of gold. Traditionally gold is one of the defensive assets during periods of instability.  


The demand for gold additionally increased after blocking half of the foreign exchange reserves of the Russian Central Bank. Considering the sharply increasing risks of seizure of the foreign currency assets, central banks of other countries slowly change the structure of their reserves where the share of gold will increase. The physical metal, unlike currency account entries, is much more protected, especially when it is stored on national territory. 


At the same time, gold is under the pressure by the growth of the USA government bond yield. The United States treasury bonds are direct competitors of gold for the status of the "quiet harbor", and the growth of their return makes gold less attractive as it doesn’t provide the interest payments. With the growth of inflation Fed has to fight the tightening of monetary policy, and it will continue to put pressure on all assets stored in dollars.


Currently, the gold moves on the flat with the lower border within a range of 1905-1915 and the upper border within a range of 1950-1960. While the breakdown of these levels with the consolidation of the price outside the designated limits didn’t occur, it makes sense to use the tactics of trading in the rebound of the price from one sideward border to another. Now the price is pressed by the upper Bollinger band, the descent to the lower border is more likely to happen at levels 1905-1915.



 The following trading strategy options can be suggested:


 1) Sell gold when the price reaches the level of 1950. Take profit – 1915. Stop loss – 1960.


 2) Buy gold when the price reaches the level of 1915. Take profit – 1950. Stop loss – 1905.


 Also, traders can use Trailing stop instead of fixed Stop loss at their disposal.

Volkov_Anton
Volkov_Anton

Listed among the best MarketCheese authors
1st in the segment "Currencies"
2nd in the segments "Indices", "US stocks" and "Metals"
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