- Summary:
- Gold price meeting resistance and looking vulnerable here. All eyes on the stock market as it remains the main driver into this price action.
One thing about the gold price in 2020 is that it followed the USD dynamics closely. More precisely, as the USD fell across the board as a result of the Fed’s decision to open USD swap lines to fight the pandemic, gold made a new all-time high.
But, at the same time, other fiat currencies gained against the greenback. As such, the price action seen on gold charts since the summer started resembles the price action seen on major USD pairs, like the EURUSD, for example.
The same triangular pattern seen on the chart below exists on the EURUSD chart too. Also, the bounce higher in the gold price that currently meets dynamic resistance, appears on the EURUSD too.
What does it tell us?
It tells us that, just like the EURUSD or the USD in general, the gold price waits for the U.S. elections to pass before making a new move. As such, trading it at these levels works best from a technical point of view rather than from a fundamental one.
Moreover, any trade should follow strict risk management tools. As such, when buying or selling markets that move based on similar inputs, consider a risk-reward ratio of at least 1:2 and, more importantly, tight ranges. Also, trade small, as the market takes its time until we get closer to the election day.
Gold Price Technical Analysis
Both bulls and bears have something to trade here. Bulls have the stock market on their side. Effectively, the stock market levitates and is likely to keep moving higher the closer we get to the elections.
If the correlation with the USD persists, higher stocks means lower USD. Hence, higher gold. However, the technical perspective shows gold at dynamic resistance.
Bears would like to sell at market and add some more on a continued move towards the apex of the previous triangle. A proper stop must be at the dynamic resistance given by the other edge of the triangle. Projecting the risk twice to the downside gives the risk-reward ratio mentioned earlier.
Gold Price Forecast
