Gold price: is now the time to lock in a long trade?
It’s been a while coming but all of sudden gold has popped over recent resistance and in doing so it now appears to have further upside potential. We look at charts of both gold and the US dollar.
(Video Transcript)
Gold trade idea
Let's take a look at the trade idea as we begin to climb into some momentum here now on to 2023 and I wanted to bring up a chart of gold.
We've been talking a lot about what's happening with gold over the last couple of years or so. Remember the highs that we saw back in March last year at 2070? And some analysts are now suggesting this is now definitely possible in the next few months or so. Certainly a couple of quarters, possibly maybe on the upside.
And indeed we've come out of the new year with real strength and real vigor for this. The only thing I'd say is that if you look at the candle shapes here, they all have long wicks on the upper side. Now this indicates to me that there is enthusiastic buying, but there are those in the market that are trying to sell out at those highs and that itself is perhaps something that might put a little bit of a break on some upside in the future.
That being said, this is a momentum you can see which is beginning to pick up steam. We've got the MACD now pointing higher and in fact for the first time in a while, we've now just appeared above this falling line of resistance that we have in the MACD which I drew a couple of weeks or so ago. And the blue line is now above the red dotted line which indicates to me that we've got momentum now beginning to build on the upside.
The question is how high how fast and whether or not you can continue to make money on the upside.
We've got this rising line of support that we've had, and if you are long on this your stop will continue to be for the short-term at least under the underside of this line. And that line kicks in just above the 1800 level.
So I'd suggest you put your stop just below that maybe 1790. If you are long on gold at 1855 we'll be following up on this on the Early Morning Call over the next few days and continue to monitor this market.
USD
One of the inverse trades is what's happening with the dollar. And we've seen the dollar bouncing along this line of support over the last two or three weeks or so and many suggesting that we've got further weakness in the dollar to come. And that itself would give some more impetus on the upside for the price of gold.
And if you're dollars then your stock goes above this 105 level with a view to taking that lower as well and possibly break in this line of support at 103. Then on the way down to 10110, and that would give further upside to this trade on gold.
At the moment at least we're trading at levels not seen since the 14th of June but I'm fully expecting potential dollar weakness later on this week as we go into the US jobs data, and this itself could give some upside still to come this week for the price of gold.
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