Long XAU/USD?
Let's be honest, so far this year and for the last few years gold just hasn't performed. However, this may be an opportunity for a bullish turnaround.
Fundamentals
- Gold is largely tied to the performance of the USD, which explains its bearish trend this year
- Powell is expected to continue the hiking cycle into 2019, however their have been rumblings about a possible slow down in the pace of hikes
This possibility has arisen because of the flattening of the 2s10s yield curve, an early indicator of recessions on inversion. The Fed is likely to continue hiking, but may slow their pace to avoid or mitigate the risk of yield curve inversion.
- The result: USD would weaken, interest rates would not be as steep as initially priced in. This is bullish for gold and provides some relief to battered emerging markets, however the trade war leaves much to be debated on that front.
- Gold could see a resurgence towards May levels on dollar weakness
- Additionally gold prices tend to rise post August, largely due to wedding season in the east (India in particular), increasing gold demand.
What about the Technicals??
- If the waves are correct, we are seeing a corrective pattern post the 5th wave on a bearish run.
- Often this corrective pattern could lead to more bearish undertone, but it looks as though a bullish flag has formed, indicating another leg up for XAU.
- Search for the bullish breakout and ride the wave!
Fundamentals
- Gold is largely tied to the performance of the USD, which explains its bearish trend this year
- Powell is expected to continue the hiking cycle into 2019, however their have been rumblings about a possible slow down in the pace of hikes
This possibility has arisen because of the flattening of the 2s10s yield curve, an early indicator of recessions on inversion. The Fed is likely to continue hiking, but may slow their pace to avoid or mitigate the risk of yield curve inversion.
- The result: USD would weaken, interest rates would not be as steep as initially priced in. This is bullish for gold and provides some relief to battered emerging markets, however the trade war leaves much to be debated on that front.
- Gold could see a resurgence towards May levels on dollar weakness
- Additionally gold prices tend to rise post August, largely due to wedding season in the east (India in particular), increasing gold demand.
What about the Technicals??
- If the waves are correct, we are seeing a corrective pattern post the 5th wave on a bearish run.
- Often this corrective pattern could lead to more bearish undertone, but it looks as though a bullish flag has formed, indicating another leg up for XAU.
- Search for the bullish breakout and ride the wave!
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