Gold Poises the Best Test for Greed and Wisdom

Best Test 2Gold prices had its worst performance since April 2018. It has dropped 12.7% from April 17th 2018 to August 17th 2018.   On its way down, there were several rebounds which triggered some hope to gold traders and investors alike. But they turned out to be just a temporary technical rebounds and later dipped even deeper. However, the scenario has turned a little different last week.

The spot Gold has rallied up 2.5% for the week just past. Friday close was particularly encouraging. It has surged 1.53% in a single trading day. However the previous 2 hugh drops on August 13th and 15th remained fresh in memory, cast doubt on whether this is really the long awaited gold rally has arrived or it is just another temporary technical rebound or a bear trap ensnared. This is possibly the most concerned issue for all gold players who are mostly price trapped at this moment.

Gold Analysis and Expectation

First of all, the previous hugh drops were possibly a good clue that Gold has bottomed. Because it has shaken out most armature players. This is one of the sneaky plays of stock market most the time. The most fearful time is the best time to enter market instead of running away or sitting by the side. This is the reverse psychology strategy for market play.

Gold Futures
Gold prices would go higher in the coming trading sessions?

Secondly, the one day spike up has broken through and seated above middle line of Bollinger band for the first time in weeks. Thirdly, the Relative Strength Indicator (RSI) shows that gold price strength has risen to the decisive middle level. These are indicators showing that gold will continue to move up in the coming trading sessions.

Fundamentally, analysts pointed out that gold spike up because the dollar was hit by Fed chairman’s speech. They have assessed that Powell has seemingly tuned down the strength of the US economic looking forward. Market expectation of December rate hike has dropped a little bit from previous expectation rating.

Even from all these predictions, I do personally feel that fly days take off for gold has not really arrived yet. Though analysts said that US economic weakness was showing, but it is more on speculative than conclusive nature.  The possibility of rate hike in December still stands. If there is any interest rate hike, the dollar will be strengthened, and gold prices will have its chances to reverse. This has been the opposite direction the dollar and gold prices have been playing in the the past 5 years or more.

Gold and Dollar
The dollar and gold prices have been in opposite direction ever since 5 years ago or even more.

Only the three interest hikes for next year are in doubt if ever shall be. Moving forward in short term, the dollar would still have its room for the upside this year and gold would also has its reversal or its back down on its way up.

The question remains now is; how high would gold move? How low would gold drop back if it ever reverses? Will it drop back down to current low level or even lower? This will be a good time for gold investors to exercise wisdom and tame their greed from this time moving forward.

Exercising Good Wisdom

For my 10 cents suggestion would be; for those whosoever have already exhausted their capital in order to top down their entry prices, should take back profit if gold prices have reached a minimum profiting level. If it reaches more profiting level, more profit taking should be in play. Ultimately, small capital players may take full profit if necessary. While for larger capital, it will be advisable to leave a certain nominal sum says 20% to 30 % remains invested in case gold would fly higher than expected.

There’s still too many uncertainties in the US economic future. No one has really known where the critical point the US economy is going to reverse. Many analysts point to 2019, but the year 2019 is still far away from now and the entire year of 2019 has too many trading days too.  Therefore, being conservative and reserved can always be a better choice for now.

Thank you for reading and happy investing but invest safely!

 

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RISK WARNINGS

The view and opinion expressed are personal views of the author and are subject to change based on market and other conditions.  This write up does not constitute sole advice for investment decision. Investors are advised to do further reading and research to make up individual investment decision.

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