Gold analysis: technical take.

As far as the financial markets are seeking direction in the uncertain environment of coronavirus pandemic and US elections, the technical analysis becomes more essential for understanding the background of future trends. It’s been written and said many words about the price of gold as the safe-haven asset and the demand for the yellow metal from the side of speculators amid exceptionally high levels of liquidity in the financial system. The long-term fundamental outlook is definitely in favor of the price of gold. The only question I currently have is what is an attractive level to enter long positions on gold from a technical point of view. 

The most interesting timeframe to analyze, in my opinion, is the H4 chart as it combines the mid-term perspective with intraday price swings. The daily chart shows nothing to me, while the H1 chart is full of unnecessary noise. The chart setup below combines two different types of technical indicators with an in-depth graphical analysis and simple moving average. The SMA period I usually choose among Fibonacci numbers, and one of the most preferred is 89 as it reflects a much longer period and smoothes the noise related to short-term price fluctuations. ADX and DI, Chaikin oscillators have the default period, no need to change a thing there.

First of all, I pay much attention to the so-called median lines when I arrange an in-depth technical analysis. It’s not hard to build a support or resistance trendline, but they are not so informative as median lines as they do not show consolidation ranges. For example, you see that the uptrend is likely, but you struggle to identify the best entry point from which the price will soar. 

The most important median line on the chart above is the lower dashed green line. Four green arrows below it and one red arrow above it highlight reversal points of the intraday price action. Besides, the price of gold was in the consolidation range on October 23-28 before the bearish breakout. The recent bullish rebound was supported by the short-term support trendline, the angle of which does not look like it will hold for too long. On the other hand, the latest rally was limited by an important horizontal static resistance at $1909.13 per ounce, which coincides with the median. Therefore, if the bulls want to continue the upside pressure, which by the way is confirmed by long downside shadows on the latest candlesticks, then the price of gold has to clearly break the double resistance and chart several close quotes above $1910 per ounce. Once that happened (and I think that that’s just a matter of time), the next target will be shifted to a range between $1926.24 and $1930.48 per ounce. 

Indicators point to two concerns for the bulls. The ADX and DI indicator still have a bearish surplus as the red line is above the green line. Also, the mainline is below the threshold, which shows a weak momentum and thus the inability of bulls to keep the buying pressure. On top of that, the Chaikin oscillator has gone too far north from the middle line, promising a bearish retracement in the nearest future. Even if the price action will be range-bound, the oscillator must reload the overbought condition. Such a combination of two bearish factors allows me to wait for a deeper rebound south and therefore, a more attractive price for long positions. Shorting gold might be dangerous, given the overall bullish sentiment in the medium-term. This is why I prefer having a wait-and-see position, looking forward to attractive entry points for longs with the swing trading strategy.