Inflation expectation is getting higher. Trader sentiment is still cautious over continuance of bullish trend in gold. Federal Reserve chairman has himself said that inflation will remain at higher levels at least until next summer. Gold is the best hedge against inflation.
Let's discuss the technical view in case gold price crashes. Gold trading around $1750 is a short term neutral price and long term bullish trend. I am not a gold bear. I am long term gold bull till $1600.
|
Comex Gold Futures |
Moving averages |
||||||
|
|
HIGH |
LOW |
|
50 |
100 |
200 |
|
|
2019 |
$1,566.20 |
$1,267.30 |
Daily |
$1,787.10 |
$1,810.70 |
$1,804.00 |
|
|
2020 |
$2,089.20 |
$1,450.90 |
Weekly |
$1,818.06 |
$1,778.30 |
$1,583.20 |
|
|
2021 |
$1,962.50 |
$1,673.30 |
Monthly |
$1,573.80 |
$1,428.40 |
$1,241.60 |
|
(2021 is as on close of 30th September)
Short term View
- Trend is bearish as gold is trading below moving average of 50 day, 100 day and 200 day.
- Gold can fall to $1670 and $1581.20 in case $1841.90 is not broken by end October.
- Right now gold has to trade over one hundred week moving average of $1778.30 (on weekly closing basis) to be in a short term bullish zone.
Medium term to Long term (3 months to 6 months)
- There is a triple top between $1910-$1919 zone.
- There is also a triple top between $1835-$1840 zone.
- Failure of gold to break past $1840 before end November will result in a crash to $1566.30 and $1423.05.
- Failure of gold to break past $1840 before end January 2022 will result in a crash to $1423.05
- However in case gold does not fall below 2021 low of $1673.30 before end November then there will be a massive short covering rally and a rise to $1962 and $2089.
- In the long term and till first quarter of next year gold has to trade over two hundred week moving average (1583.20 as of now, changes every week) to be in a bullish zone.
The above is the technical view. Gold price is case of long term bullish trend and short term cautious optimism. Taper talks are all over the net and social media. Federal Reserve officials are feeding the media with interest rate hikes at the end of next year. I cannot envisage an interest rate hike as long as inflation continues to rise. Energy inflation (due to every rising natural gas prices) is a big cause of concern. Higher energy prices will derail global growth. Central banks will once again expand money supply if and when there are hints of reduced global growth. So ignore the interest rate hike news. Federal Reserve speakers are just trying to dissuade you from investing in physical gold and gold ETF. But remember that gold price investment is for Christmas of 2022.
Gold and the September price crashes
Every year gold price crashes in September only to rise sharply in October and November. One more thing which I have observed is that most of the price crash in gold is when comex future come to an end. End of January, End of March, End of May, End of July, End of September, end of November generally sees big price crashes (from the months high) every year. This has been the historical trend. I will be just discussing the September month trend of past years.
|
Comex Gold December High- Low -Close of September month each year |
|||
|
|
HIGH |
LOW |
CLOSE |
|
2015 |
$1,156.40 |
$1,097.70 |
$1,115.20 |
|
2016 |
$1,357.60 |
$1,305.50 |
$1,317.10 |
|
2017 |
$1,362.40 |
$1,278.20 |
$1,284.80 |
|
2018 |
$1,218.00 |
$1,184.30 |
$1,196.20 |
|
2019 |
$1,566.20 |
$1,470.50 |
$1,472.90 |
|
2020 |
$2,001.20 |
$1,851.00 |
$1,895.50 |
|
2021 |
$1,836.90 |
$1,721.10 |
$1,757.00 |
The next two weeks are very crucial for gold price to continue its bullish trend. Taper by Federal reserve is factored in by the traders. Global economic news and resultant impact on bond yields will impact gold more than taper/interest rate news.Historical trend suggest that gold price can form a short term bottom if it rises after the release of US September nonfarm payrolls on 8th October. US September jobs and US September inflation numbers (CPI and PPI) will set the trend of gold price till Christmas. Physical gold demand in India and Asia will be very high for the rest of the year if there is no new wave of coronavirus. The expected pace of rise will give us the investment demand trend. Right now investors are shunning gold.
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