Gold (XAU/USD) closed at a seven-year high today! 🎉
Like I mentioned in my original trade idea, I was looking for gold to weaken towards its 50 SMA, and then resume its uptrend from there (which it did).
Let’s take a deeper look at the yellow metal.
According to MarketMilk™, XAU/USD’s performance is looking…golden!
Gold is green across the board!
Let’s take a look at gold’s short-term trend strength:
And right now, it’s looking mighty bullish.
Silver (XAG/USD) is in a bullish short-term trend as well.
Let’s take a look at gold volatility.
Since folks tend to rush into gold during times of fear, its volatility behaves differently from “normal” volatility.Usually, high volatility means price falls. For example, if a stock is highly volatile, it’s probably tanking.
But in gold’s case, high volatility usually means gold rises.
Gold and gold volatility (GVZ) have been moving in tandem….until now.
Gold reached new highs but gold volatility did not.
Will GVZ turn up? 🤔
Let’s look at gold’s daily (1D) chart…
Today, price not only closed above $1700, a psychological resistance level but also above its former high of $1703 on March 9.Folks, we have ourselves a breakout!
Will we see a continuation from this breakout?
The fundamental narrative support further upside.
Not only does uncertainty remain in the markets due to the coronavirus pandemic, which favors safe-haven assets (like gold), but with lots of central banks announcing record amounts of stimulus (money printing), there’s now growing demand for gold as a hedge against future inflation.
I still see a move towards gold’s all-time high (ATH) of $1921.
While I remain long XAU/USD, I will move my initial stop loss higher and lock in some profit.
My old stop loss (SL) was 1540 (light purple dashed line).
My new stop loss (SL) is now 1609.
My entry was 1600 so this locks in $9 or 900 pips, a 0.56% gain.
As a reminder to folks who are new, when trading gold (XAU/USD), a pip is $0.01, or one cent.
One standard lot of gold equals 100 ounces.If you trade with a full 1.00 lot, a 1 pip move equals $1.
So if gold goes up 100 pips, this means the price went up $1.00.
And since you’re trading 1 lot, which is 100 ounces, it means your P/L is up $100 ($1 x 100oz).
In other words, if you’re long 1 lot of gold, for every $1.00 move, which is 100 pips, your P/L moves by $100.
Big moves in gold can quickly blow your account if you’re not using proper risk management.
So be careful and make sure you understand how trading with margin works.
Otherwise, you’ll end up with fool’s gold. 😂
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.