Gold: Your Trading Game Plan for The Week Ahead
10:52, 11 September 2023
Last week’s price action saw gold break and close below the small ascending channel which had formed during the final week of August.
The bearish channel breakdown was a scenario we mapped out in last week’s gold game plan.
A key catalyst behind the move lower in gold was a resurgent U.S. dollar with the dollar index (DXY) hitting highs not seen since March.
It’s also worth noting that the gold market continues to respect the long-term descending trendline which connects the swing highs formed in May and July (see daily candle chart below).
Spot gold daily candle chart:
Scenario 1: Completion of A,B,C,D harmonic move lower
- Market harmonics can be a very useful tool which makes forward price projections based upon the market’s current level of volatility. If we label the move lower which broke the ascending channel as A-B (see chart below) and label the retracement higher as B-C, then an ABCD harmonic pattern would have a projected completion at the support zone labelled on the chart below.
Scenario 2: Retest of resistance
- Another scenario worth considering is that the market moves higher to retest last week’s swing highs. This scenario would run against the current momentum which means participating in any retest rally would appeal more the short-term traders.
Managing risks
On average, the gold market moves up or down by $44 in a week and by $15 dollars in a day. This is taken from gold’s average true range (ATR) and can be used to calibrate your stop loss and profit target expectations.
In terms of upcoming economic news that could impact the price of gold, on Wednesday we have U.S. inflation data for September. This data will impact the market’s interest rate projections which may cause outsized volatility in U.S. dollar currency pairs and gold.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance.
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