By Tomasz Wiśniewski, Chief analyst at Alpari Research & Analysis
Gold is patiently waiting for further developments on the stock market and in the negotiations between China and US. Gold traders are waiting for a final decision, but the chart suggests that they are more likely to buy than sell. Our positive scenario for Au is supported from both sides of the market: technical and fundamental.
First, let’s look at the macros. Sell in May and go away, right? This old saying is applicable stocks, and indeed, this May is bad. The market is currently in risk off mode, so share prices are going down and money is flowing towards the safe haven assets, such as gold. In addition, we have a slightly weakened dollar. A drop in the value of USD usually positively affects the prices of commodities, so from this side, the gold bulls are covered.
Now, let’s look at the technical analysis. Unfortunately, there is no clear trading signal yet. The setup looks positive but no final decisions have been made. Why we are optimistic? Well, the price is in a big wedge (red lines), which is a trend continuation pattern (trend before that was bullish). What is more, at the end of the wedge, the price bounced from the major upwards trend line (orange), creating a double bottom formation. That looks really promising. As for the supports and resistances, the price is still locked in the middle. The crucial supports right now are the 38.2% Fibonacci and the blue horizontal line. In order to get a proper buy signal, we need to break two resistances, which are the black neckline and the upper line of the wedge. Only the price closing the day above those two will be a legitimate trigger to go long.
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