Gold gets up and dusts itself off

Gold (XAU/USD) has been getting knocked down lately, and no one is quite sure why. Gold moved lower when stocks moved higher, moved lower when stocks moved lower, and today moved higher when stocks moved higher.

Regardless, after the precious metal was beaten down to the bottom trendline of the downward sloping channel which began in August 2020, Gold was able to bounce nearly 2%, back above 1700, to near 1715. Notice that the bottom channel line confluences with the 61.8% Fibonacci retracement from the March 16^th pandemic lows to the post-pandemic highs of August 7^th, near 1692.2. In addition, the RSI was in oversold territory, which was another reason to expect the bounce.

Source: Tradingview, City Index

Learn more about how to trade gold

On a 240-minute timeframe, Gold has been moving lower in a descending wedge since February 18^th. The expectation is that price will break out of the descending wedge in the opposite direction as price nears the apex. Today price broke out. The target for the breakout of a descending wedge is 100% retracement of the wedge, which would be near the 50% retracement of the move lower from January 6^th to yesterday’s lows, and horizontal resistance, near 1817.50. However, price must first beak through horizontal resistance near 1760 (which also confluences with horizontal resistance on the daily chart) and the 38.2% Fibonacci retracement level from the previously mentioned timeframe near 1785.

Source: Tradingview, City Index

If price can’t continue high and bears step in, the first support level is the March 8^th lows, which confluences with the downward sloping trendline of the descending wedge (and the bottom trendline on the daily timeframe), near 1678. Below there, price can fall to horizontal support from March 2020 near 1643 and then horizontal support dating back to August 2019, near 1555.

XAU/USD seems as if it has been marching to the beat of its own drum lately. However, the technicals seem to have been working. If proper risk/reward management is used, Gold can be a profitable trading asset.

Learn more about gold and silver trading opportunities.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website 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.