Gold is up another half percent on the day as investors weigh in a potentially weaker dollar based on a slowdown in US output. As we continue what is expected to be a volatile week, here are some reasons why gold may have finally snapped its downtrend and is gearing for a long term upside move.
Our market scanner is giving gold a +2 buy rating. The Edgefinder gave gold a positive score one week ago, and the scanner accurately predicted a price swing to the upside. The metal got its first positive rating on July 27. Since then, price ran up another 3%.
Gold's performance is largely tied with the economic state of the US as well as the geopolitical state around the world. In times of conflict, like the situation in Ukraine, gold will usually find upside. If GDP growth slows down or turns negative, investors find more value in gold over the market and the dollar.
In this case, we are experiencing both. However, according to last week's COT reports, the metal is not really seeing any considerable interest from major players. So, this week might be the first time in a while that institutions are putting more money into the metal.
Investors may be trying to price in a higher gold price on future contractions in GDP and job growth (NFP).
Gold broke above the falling trend line on the 1D chart, marking a big bullish indicator for the precious metal. Price is now testing a big resistance level at $1787 but shows strong potential to the upside. If we can see a close above the falling trend line/resistance level, gold might get above the $1800s again. The Edgefinder is now giving gold a positive outlook as the US market continues to show reactionary periods in GDP. Price is exceptionally volatile too, so big price swings are likely to continue as we approach Friday's NFP news.
The fib drawing suggest major resistance around $1860 should price complete a break above the current resistance level.
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