A disappointing January for the gold market

By 25/01/2021News
Morning Stock News

Gold  1853,74

EURUSD   1,2182
(+0,11 %)

DJIA  30993,50

OIL.WTI  52,335

DAX   13865,50

The gold metal opened the first trading day of the year with a gap up, rising above $1,900 per troy ounce again. The breach of the two-month high triggered a new wave of optimism among investors. A quick exit into the $2,000-$2,200 range was expected. But something went wrong.



On the third trading day, gold reversed and stonewalled on the Capitol assault. In hindsight, analysts suggested that investors immediately began to take profits when it became clear that Donald Trump’s scheme had failed. Democracy, like in the best films, had won and no one else was claiming a physical takeover of power.
Is this really the case? Or maybe investor expectations were simply too high? We would remind you that gold has risen by a quarter in the past year. This has only happened a few times in the last 100 years. And almost never has the gold metal rallied that much for 2 years in a row.
That is, despite the huge expectations and the injection of cash by the Central Banks, the statistics are not on the side of the gold bulls.
A reasonable question arises. What relevance do 100-year statistics have to the current situation? Indeed, if an investor were to operate with a horizon of at least 50 years, and every year sold/bought gold for a small percentage of their capital, it would be worth paying attention to statistical patterns.
But now to go short in gold just because it’s almost never risen much 2 years in a row…that’s a bit insane. Accordingly, gold sellers, and since the price is falling, supply temporarily exceeds demand, have very different rationales.

What does the chart tell us?

At first glance, things are sad. There seems to be a strong downtrend on the daily timeframe. This is indeed the case. But let’s focus on the right side of this chart. We see the following:
• In the 15 trading days so far this year, the daily has only closed below the 200-day moving average (yellow) 3 times. In other words, it acts as a very strong support.
• Equally important is the direction of this moving average. It is pointing upwards. That means that even if the price consolidates around the SMA200 for a long time, the short-term trend is still upward.
• But the most worrisome thing for both the bulls and the bears is the rapidly tapering triangle. In case of a strong decline in volatility, the exit from the triangle will happen in a month at the most anyway. With recent days’ volatility, it will happen much faster.
If the triangle is broken upwards, the technical picture will change completely. This will lead to a convergence of both fundamental and technical factors, looking in the direction of the gold metal’s rapid rise.
Therefore, it is critical for both speculators and intermediate-term investors to watch out which way the exit will occur. And then adjust their actions based on the new realities, according to the TA.

10.00 IFO Business Optimism Index for Germany for January
14.30 FBI Chicago National Activity Index for December

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