Gold markets break major resistance

Kate Leaman Kate Leaman

7 August 2019

Gold bars on a linear chart

Gold markets broke significant resistance in the form of the $1500 level during the trading session on Wednesday, as the uptrend has continued to be rather drastic. At this point, the market has been in and uptrend, and we just got a little extra “juice” in the market via surprise interest rate cuts overnight in places such as New Zealand, India, and Thailand. Because of this, it looks very likely that we are going to continue to see central banks around the world cut interest rates. This is extraordinarily strong bullish fundamental news for gold.

Central banks

nzd/cad chart

NZD/CAD

Central banks around the world continue to cut interest rates so this should provide plenty of strength for the precious metals markets. At this point, we have broken above the $1500 level as those central banks cutting rates suggests that we are going to continue to struggle to keep the value of precious metals lower.

With this extra rocket fuel in the market, I think that short-term pullbacks will continue to be bought, as central banks loosening monetary policy will bring down the value of fiat currency. This doesn’t really matter if you are pricing gold in US dollars, Canadian dollars, New Zealand dollars, Indian Rupee, or anything else in the world. Gold is starting to outperform most things. With this being the case in the fact that we have sliced through the $1500 level so easily suggests to me that we have a massive demand for gold.

Continued volatility

Continued volatility will be a mainstay when it comes to the precious metals markets, with a significant amount of uncertainty out there. With this uncertainty though, it will favor the upside so quite frankly I love the idea of seeing pullbacks and look at them as opportunities. In fact, regardless of how volatile it gets, as long as we can stay above the $1450 level, I believe that you can only go long of this market.

Look for short-term pullbacks, don’t try to jump in right away, as you will be “chasing the trade.” This is one of the easiest ways to lose money in the markets, and quite frankly in the bigger scheme of things, we will have plenty of time to continue to go long of this market as this is the beginning of a longer-term move.

The trade going forward

It’s rather simple: The Gold markets should continue to be very bullish, and quite frankly unless we get some type of complete reversal by the Federal Reserve, it’s going to be difficult to imagine a scenario where you could be selling. At this point, you can continue to add to a core position on short-term dips, as we are going to be looking towards the $1800 level longer-term, possibly even the $2000 level.

There is no way to short this market until we break down below the $1400 level, as there is a massive “support block” from the $1450 level extending down to the $1400 level. At this point, gold is one of the most bullish markets out there.


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