ThinkForex - Analytics


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    Gold vulnerable to a shakeout in week/s ahead

    We sit below the 2015 highs after moving $250 higher in just 5 months. Whilst my overall view is for a higher Gold by the end of 2016 I am on the lookout for a deeper retracement for wave two first. 

    Gold has continued to make those who sat in the sideline envious, as it clawed back an astonishing $250 from the $1046 lows. We cannot blame anyone for wanting to sit this one out after no doubt getting battered and bruised trying to 'bottom pick' the next Gold rally, all the way down from $1911 to $1046. 

    Over four years of false upside breaks is enough to have some investors hang up their gloves, especially if their trading experience was gleaned during the epic 10-year bull rally between 2001 and 2011.  

    However, whilst I see a technical and funda-psychological reason for Gold to rally higher over the coming months or even years, I suspect we may be poised for a shakeout before the trend resumes over the coming week/s. 

    First off we have stalled below the 2015 high, which is an obvious place to entice profit taking or bearish bets. However, we have also experienced the most bullish 5-month move since the final 5-months of the bubble popping. That alone is not a reason to see a revrsal as such but we should at least keep this in our minds as markets simply do not move in a straight line for too long.

    We are also seeing signs of the USD bullish move I have been seeking these past two weeks which should continue to add pressure to any upside move. Of course the second that the Greenback loses any upside desires then Gold will be supported which leaves potential to break above the 2015 highs. 

    I believe we are in in wave one, following the completion of the correction from the all-time highs. At some point this will warrant a pullback counter to the bullish move from the $1046 lows. However, wave twos are one of the least predictable as we could in theory retrace 99% of the move before reversing the bullish side and breaking to new highs. Alternatively, we may only experience a minor pullback before the trend resumes.

    Either way I do expect to see a higher Gold price throughout 2016 and maintain the low at $1046 has been witnessed. I now hope (along with anyone else sat on the sidelines) that we are awarded with a relatively deep pullback for wave two so we can position ourselves long for the 'long haul' 

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