Gold And Oil Are At Key Inflection Points

Two Overlooked Assets You Should Be Trading

It’s understandable that most traders who get into speculation tend to focus on currencies. Currencies are the most active market, the most liquid market, the most leveraged market, and the market with the most advertising. That doesn’t mean there are other assets to trade and ones that can make you big returns if you get on the right side of the market.What I’m talking about today are gold and oil. As commodities these assets are affected by the dollar but they also have their own fundamentals and give some pretty good signals.

Gold Is Trading At Resistance, Resistance Is Present

Gold prices shot higher last week as traders around the world moved into the ultimate risk-off trade. The metal tested resistance for two days, Thursday and Friday, and then shot above it today, Monday. At this time the price action is bearish and forming a red candle that confirms the presence of resistance. This makes the $1591 level very important to near and long-term direction as it could become a point of reversal or continuation. In either case the moves will be big over the next few weeks and months.

What might push gold higher? The spreading coronavirus, its impact on the global economy, and a growing chance the S&P 500 might fall 20% or more. The FOMC outlook helps too. The Fed is expected to cut rates in the middle of the year and that will definitely hurt the dollar and help gold. If gold breaks above resistance and closes there we can expect it to continue rising in the near to short-term. My initial targets are at $1700 and $1725.

What might keep gold from moving higher? The technical. The technical are incredibly bearish and point to a major reversal in prices… if there is a catalyst to sell. What I am noting is a significant divergence in MACD from the current high, if that signals confirms in the stochastic and/or with price action a move to $1560 is certain, a deeper decline will depend on price action at the moving average.

Oil Trading At Support

Oil prices have been in a steep decline over the past month or so as tepid demand, rising supply and now the coronavirus weigh on prices. The black gold, WTI I am talking about here, is now trading at an 8-month low and may move much lower. The question is what will happen this week at the surprise OPEC meeting. The cartel is sure to talk about prices and the possibility of another production cut, the risk to the market is if they decide to cut or not and by how much if they do. If WTI breaks to a new low expect it to fall another 10% to the $45 region, if support confirms prices could rebound 10% t0 20% over the next week or so.