Friday, 31 July 2020
I would like to share my personal opinion on Gold which has hit all time high since year 2011, and what's next for gold after historic milestone?
Gold price rise is far from over and may reach another milestone in the next few years. reason being there are a few fundamental reason supporting my view.
Firstly, due to covid 19 outbreak global central banks had undertaken massive liquidity injection into the capital markets through monetary policy, quantitative easing (QE) where money supply M2 is increasing at an alarming rate. This monetary policy tool will cause hyperinflation across asset prices through devaluing of US dollar. Through QE measures and by lowering interest rates to near zero percent, Federal Reserve, central bank provides confidence in the financial market, avoid liquidty crunch where business and corporations are accessing to available credit to avoid insolvency.
Secondly, Gold is supported by a large trend of weakening US dollar which is devalue due to QE and lowering of interest rate, where gold usually have an inverse relationship with the US dollar and it seems now that it is perfectly in sync in this amazing relationship where gold may have more upside to go. As well-known Legendary investor, Jim Rogers said that the commodities bull market usually will last 20 to 23 years, so in fact the commodities bull market had start from year 2000 driven by China consumption.
US Dollar Technical Charts
Observations from US Dollar chart daily timeframe, there should be a technical rebound to price level 95 where it is previously a support turn resistance, based on fund flows analysis there should be another downside wave down to 80 level.
Thirdly, gold is also a safe haven asset to position for any crisis like covid 19 outbreak, wars, geopolitical tensions, trade war, currency war, foreign policy war to name a few or probably a shut down of congress due to budget deficit ceiling issue. Through the next few years i observe quite a few hotspot issue relating to geopolitical tensions which may result in an escalation into war.
Fourth, year 2021 is a Ox year with Metal Element and in Chinese Feng Shui context, it bode well for the financial markets to perform extremely well, fantastic bull run.
to name a few geopolitical tension which may arise as a result,
1) China Taiwan conflict on one underlying island called Changsha which has a strategic advantage over the south china sea maritime route.
2) China US conflict over south china sea
3) Turkey Syria Libya geopolitical tensions may erupt.
4) Isreal Lebanon conflict
5) US Iran conflict
6) North Korea South Korea conflict
A peek into Technical Chart Analysis of Gold to determine future price fluctuations.
Gold Technical Charts
Observations from Gold Future chart monthly timeframe, there should be a technical pullback to price level 1600 where it is previously a resistance turn support, based on fund flows analysis there should be another upside wave up to 2800 (technical) to 3000 (psychological resistance) level, using the depth of the big rounding bottom to forecast future price direction. Should price of gold retest 1600 support level and rebound it will form a cup and handle chart pattern for more upside.
Gold price has hit 2005 price level as i wrote this article.
To time my re-entry for gold take price 2005 x 0.85 (15%) safety discount margin mechanism as a guide which is computed as 1704, below 1704 looks attractive to enter but i prefer 1600 price level for safe entry as it is near to critical neckline support level.
May the force be with you, to prosper and stay safe and healthy in the face of covid 19 yet over.
Disclaimer: All news, information and charts shared is purely by my research and personal views only. This is not a trading recommendation or advice but on the basis of sharing information and educating the investment community. Different traders and investors adopt different trading strategies and risk management approach hence if in doubt please approach or seek clarifications with your Financial Adviser, Broker and Banker.
at July 31, 2020