Gold Appears to Be Losing Some of its Safe Have Appeal
Safe Haven Rally
After the sharp rally in gold futures that followed the onset of the Middle Eastern conflict, gold seems to be losing some of its safe haven appeal.
If the war stays isolated, then we might not see the safe haven investors piling in like we saw at the beginning of October.
In the chart below, you can see the safe haven rally that followed the start of the conflict and the subsequent selling. I highlighted a few local areas of major and minor support that coincide with short-term fibonacci levels. If this safe haven rally continues, then this is a likely area for a rebound.
Indicators Point Towards Bearishness
In the near-term picture, the past two weeks, things have turned quite bearish for gold. You can see this in the major subindicators on the daily candles. Both KDJ and RSI have crossed into bearish territory, and MACD has printed a bearish cross.
Gold Miners are Feeling the Pain
The charts for gold miners are somewhat confirming the bearishness in gold futures. But the picture looks even more bearish.
The price action for GDX is printing fresh lows following rejection of a multiple top near downward trending resistance. Technically speaking, short setup doesn't get much better than this.
Dollar vs. Gold
Aside from its safe haven status, gold's value is determined by the laws of supply and demand, as well as the value of the dollar.
Because golds value is measured in dollars, there is an inverse correlation between the value of gold and the dollar. When the dollar is climbing the it generally weakens the value of gold. Conversely, when the dollar is dropping, then this will add strength to golds value.
The past couple of months, the dollar has been losing strength. This has certainly added to the recent bullishness we have seen in gold.
Conclusion
Currently, things look bearish in the short term for gold. Personally, I have said that I will be bearish until a recession or until the Fed stops pushing up the dollar.
There are a few factors that can change the bearish tone for gold, like a recession. This would add to the safe haven appeal of gold.
If the Middle Eastern conflict intensifies and expands to other countries, then gold's safe haven appeal might strengthen the precious metal.
The direction of the dollar will ultimately dictate the path of gold. So watch which direction the dollar is moving.
Once the Fed sends a strong signal of ending the rate hikes or mentions a rate cut, then the dollar will likely fall from there. Besides the possibility of a major war, this is the biggest catalyst I think we will see for gold in the near future. I think it will be very bullish for gold.
So how bullish are you towards gold? Has the Isreal-Hammas conflict spiked your interest to buy gold? Do you think gold's price will make new all-time highs very soon?
As always, I am not a financial professional, and this is not investment advice. Be careful and be patient. Dont anticipate the market. Rather, participate in the market. Give some of your investments time and know when to cut your losses. Don't be greedy. Don't invest in anything you don't understand. Don't put all of your eggs in one basket. Don't listen to the hype. Don't fomo or panic into or out of trades. Do your own due diligence. And just follow the trends. A trend is your friend. Good luck trading.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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iamiam : gold may collapse. at least in the west. gold is moving east with most other assets. they are worth more in the east. this is not good on a larger scale. but it means we could see a collapse as the west floods to t-bills. can gold return 5% in 3 months? a tbill can. nearly everything in the west will drop compared to tbills.... the really bad part is that this has happened before, many times. first, the gold moves, and then soldiers follow it.
SpyderCall OP iamiam : well said
MonkeyGee : That's good news right
SpyderCall OP MonkeyGee : it can be good or bad news. depending on what you are invested in.
SpyderCall OP MonkeyGee : Dollar should drop from here based on the technicals. Gold should start to climb now with the dollar weakening