Up until the last three months, gold had been under extreme bearish pressure. Lately, the precious metal has seen significant upside, but lots of resistance has caused long periods of consolidation. This is partly because of technical boundaries in the way have kept price down to minimal movement, but something big just happened to the gold market that could be a big bullish indicator. This deep dive will take us through the fundamentals and technicals of gold, and whether or not we should be expecting further gains this week or in the future.
Since late March and early April, COT reports show an increase in non-commercial net long positions. This means that big money has been slowly staking themselves in this metal. Over the past week, gold positions from the non-commercial section worked up to 56% of portfolios long on gold while a mere 18% are short. Change in interest saw +11,967 contracts per 100 troy ounces in the past week with a total change in open interest was +28,352 as of Monday 5/17/2021.
Inflation of the USD will always cause a surge in demand for gold, and fears of a devaluing dollar from the trillions printed during the pandemic are finally catching up. What's different is that this time cryptos serve as a safe-haven for investors looking to get more bang for your buck during events where fiat falters. As crazy as it sounds, gold's competition is crypto now, and traders have to decide which they like better. Although crypto can provide higher percentage of returns, gold stands as a stable place to put your money. Buying power on the USD has steeply decreased since March of this year, so many products and services are going up in price. As a result, investors eye the tangible metal that has historically held value.
This chart shows gold on the 4H timeframe breaking above a long term falling trend line. This move above resistance is huge and could cause a serious surge in gold should price stay and close above it. Over the past three months, gold has had to break layers and layers of resistance from the staircase sell-off from August of 2020. Right now, $1850s is where investors can find some key support if gold has to retest highs. $1870s looks like the new level of resistance.
Here is just a zoomed out gold chart on the 1D timeframe. Just to put into perspective how long this downtrend lasted makes this potential breakout a massive move. It is still impossible to tell where the candle will end up by the end of the day, but a close above this line looks likely. And if that is the case, momentum could take over, and this week could be a great one for gold.
The vast majority of retail traders are short gold. However, retail usually gets in way too early as they try to fight against the market's current moves. As long as COT reports show big money entering the market, gold will probably continue to rise.
Smart Money Tracker
See where big money is flowing with the A1 Edgefinder's smart money tracker! With one click, see where the biggest money flows are entering and exiting through COT data.
Today, Fed chairman Jerome Powell spoke on the labor market and inflation. While we don't know what the future holds for the equities and currency market, we can derive certain conclusions from investors' interpretations. Here are some powerful takeaways from Powell's remarks this afternoon. Key takeaways Market Impact This caused the dollar and equities to […]
Today at 2:00 pm EST, the Fed will announce their latest interest rate decision. Estimates suggest a smaller hike of 25 basis points this time around. Here are some things to consider before the FOMC decision later today: The Fed has struggled to tighten their grip on inflation without causing too much disturbance in the […]
With the holiday season lingering on and a new year on the cusp of arrival, traders may glance at the calendar and notice there is not much economic news to anticipate on Friday to cap off a light week. In situations like these where there can be lulls in bullish and bearish momentum due to […]
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here