Gold bears have calmed down a bit on it relentless pressure on the shiny metal. Is the recent bounce another opportunity for Gold futures or CFD traders to short at better prices?
Resistance to Hold on Gold?
On the four hour chart above of Gold futures, we can see that gold has not been loved over the past month and a half. Despite the broad inflation fears that typically supports gold, it’s likely the prospects of a economic recovery due to vaccine distribution is the bigger driver. It’s also likely that rising U.S. Treasury yields have made the idea of hold gold as a safe haven in this environment less attractive relative to other assets like Government bonds and Bitcoin.
Those ideas and themes are likely to continue to prevail this week, and if we don’t see a big change in rhetoric from the Federal Reserve this week (FOMC statement (Mar. 17, 6:00 pm GMT)), then gold is likely to continue to weaken in the short-term.
From a technical perspective, the market rallied last week as bond yields retreated a bit, bouncing gold higher from a fresh 2021 low of $1673.00 to its current trading area around $1730.00
This area is the Fibonacci retracement area of the swing move from $1814.00 to $1673.00, so technical traders may start looking for bearish reversal patterns to get back into the longer-term trend lower.
This area also lines up with the falling ‘highs’ pattern that actually goes all the way back to the beginning of 2021, so longer-term players may be looking for opportunities to short as well.
So, the higher probability short-term trade is to short gold at the moment, and we’re watching out for the scenario where the Fed holds off on any action to control the rising bond yields situation before considering a short position. If that scenario plays out, we’ll be on the look out for bearish reversal patterns, hopefully after gold bounces just a bit more to the falling highs pattern and deeper into the Fibonacci retracement area.
What do you all think? Are you watching Gold for a potential swing trade? Do you think the trend lower will continue or will we see a trend shift after the Fed meeting? Let me know in the comments section below!
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.