Gold Prices
Gold is one of the asset classes that delivered the best returns so far in the year. The gold price broke higher a year ago and did not look back ever since. In the meantime, it reached the key $2,000 level and makes a new all-time high on a daily basis.
The gold price’s euphoria is easy to understand. Central banks in developed countries flooded financial markets with cheap money. From the Fed in the United States to the ECB in the Eurozone or RBA and BOJ in Asia Pacific – they all print money via quantitative easing.
The investing community pushed the gold price higher this year. Investing in gold can take various shapes – from owning jewelry, bars, coins, to owning paper gold via ETFs. The latter, known as demand from the investing community, added fuel to the gold price fire.
Investing demand reached a record-breaking pace in the first half of the year. According to a study by the World Gold Council, demand for paper gold was three times higher than the central banks’ demand for gold over the same period.
At current levels, the gold price looks poised for a correction. On the one hand, retail traders patient enough to hold on the long side are tempted to book profits. On the other hand, wannabee bulls wait for a pullback to go in.
Gold price broke a running triangle, a bullish formation that leads to much higher prices. It did. But such a triangle has a mandatory condition – the must retest the upper trendline. After the breakout, it did not, so that is the logical target for a short trade. Currently, such a retest means $1,850.
However, the move higher is so powerful that bears need proof of life first. Look for a reversal pattern using Japanese candlestick techniques – shooting star, evening star, dark-cloud cover, or even a Doji. On such a formation, sell XAUUSD against the highs with the target at the triangle’s trendline.
