Top Story

Gold’s Broad-Based Breakout Suggests Its Corrective Low Is In

Whilst trade talks have weighed on risk assets, it’s been beneficial gold which broke to a 1-month high. And seeing as the breakout wasn’t restricted to the greenback, we think the low is finally in.

Just over a month ago we thought the base was in around $1280, yet the correction opted for another cycle low before finding support around $1266. Ultimately it was the August 2018 trendline which provided gold’s springboard, which has now seen a clear break of a retracement line with bullish range expansion. With the MACD pointing higher and just crossing the zero line, it suggests momentum is realigning itself with the dominant trend. Of course, we still need to allow for the daily volatility, and prices have found resistance at $1300 so we could see a pullback from current levels. But looking at the structure, we suspect the corrective low has been seen around $1266. From here, we’d prefer to seek bullish setups around support zones and anticipate for it to break back above $1300 and head for the 2019 highs.

It’s also constructive to see that gold’s breakout was broad-based and not just limited to the USD. We’ve created a gold basket by taking a simple average of gold versus FX majors. From this we note that the retracement from the 2019 highs was relatively shallow (which is a sign of strength) and yesterday’s breakout was the most bullish day for the gold basket since October.

And as noted in Monday’s COT report, gold was the only metal to see an increase of net-long exposure last week, among the metals we track. Given the rising trade tensions since last Tuesday and of course yesterday’s breakout, we expect bullish exposure to have picked up by the next report.   


Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.

Open an Account