Gold Is Looking Vulnerable
Axi | Mar 01, 2017 14:26
Originally published by AxiTrader
Gold tried to break through the 200-day moving average two nights ago making a high around $1263 dollars.
Since then however it has pulled back to $1245 as the US dollar strengthened and rates rose after Fed speakers have made it increasingly clear that they are looking seriously at the possibility of increasing interest rates at the FOMC meeting mid-month.
It is in this relationship that it is clear that gold is vulnerable to a substantial pullback - perhaps even below $1200.
What's clear in this relationship - between gold and the move in interest rates and the US dollar - is the clear divergence between the continuation of the gold rally even though rates and the US dollar stabilised before rising recently (both are inverted on the chart above).
The question is whether the recent rally in gold - which appears to reflect some insurance against uncertainty around the implementation of the US administration's many policies, high equity prices, and the uncertainty of the French presidential election can persist in the face of the Fed's warning it may raise rates.
Arguably the relationship between these three asset prices suggests at the very least gold's current pricing may be out of line with what traders might think is fair value.
Looking at the chart of gold from my AxiTrader MT4 platform the failure to hold above the 200-day moving average is the first warning of a pullback. The question of how far then depends of the type of trader one is.
I like to put pretty straight forward trendlines on my charts to gauge trends and support. So in this sense the zone between $1235 and $1240 should offer some support. But if that breaks then the $1219/20 level becomes the focus once again.
Have a great day's trading.
Get The App
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.