Gold Is The Hottest Trade Today, All-Time Highs In Sight
Gold Gets A Cold
The gold market is skyrocketing. The spot price is up nearly 2.0% as I write this and risen more than 13% since the middle of December. The fundamental picture is this, inflows of cash to ETFs and Mutual funds, along with strategic purchases by central banks, is underpinning the move. The World Gold Council Gold Outlook for 2020 cites these factors and others, like the easy-money conditions central bankers around the world have created, and sees gold buoyant through 2020 at least.
Add to this the growing coronavirus scare and the flight-to-safety trade and you get today’s rally. The coronavirus has now claimed more than 2,500 lives and is spreading throughout the world. South Korea, Italy and Iran all report a growing number of cases that threaten to shut down activity in areas outside of China. Bottom line, the virus issue is far from over and will be a driving force in gold prices for the foreseeable near-term.
The Gold Chart, It’s Not Too Late To Get In
The gold charts are unbelievably bullish. Starting with the chart of daily prices I see large green/white candles moving up from a point of resistance. The point of resistance is also a point of consolidation within an uptrend that could easily go to $1780 because there are no other good targets for technical resistance. The indicators are also bullish and in support of upward price action. The MACD is convergent with the high at least and on the brink of setting an extreme peak, one of my favorite signals, so price action is likely to remain elevated if not in uptrend.
Moving on the weekly charts, gold is also moving higher following consolidation within uptrend. The move looks strong with one caveat; the indicators are still a little weak but I’ve got something to say about that, too. With MACD and stochastic still low in the range, technically divergent from the highs, there is still room for them to move higher. With my target at the $1780/$1800 level and no major points of technical resistance before than I think it likely prices will continue to move higher.
How To Play This Trade
There are a couple of ways to play this move depending on how you like to trade. Longer-term oriented traders may wish to open positions with the intention of taking profits when resistance is reached. Short-term traders will want to move down to a shorter-time frame chart and use bullish continuation patters and tests of support for their entry points.