Since the beginning of January 2019, the Gold price has been rising, making higher highs and lows which is a clear indicator of an uptrend. In March 2020, the Gold price touched 1700 USD/oz, which was the highest gold price at the time since January 2013.
In March 2020, when the first big scare of Covid-19 arose, the gold price dropped over 200 USD per ounce in just one week. The price touched the 250MA moving average line, which worked as strong support. Since then, the gold price started to climb again until August when it reached a new all-time high, 2075 USD per ounce.
Since then, gold prices have been slowly dropping. Market bulls have tried multiple times to reach the all-time-high again but without any luck. In this article, we analyze the technical aspects of Gold price and understand what lies ahead, for gold, in the near future.
Indicators used for analyzing XAU/USD
- Moving averages – 250MA / 50MA / 21MA.
- RSI – Relative Strenght Index.
- Trendlines / Support / Resistance
The three moving averages must be in correlation for establishing the trend and areas where to buy or sell one’s position. Another crucial thing about moving averages is the crossovers. For example, when 21MA crosses under 50MA, it indicates bullish weakening. If 21MA and 50MA cross under 250MA it indicates a trend of Reversal and bearish power.
(Picture 1. XAU/USD, 1D)
As Picture 1. shows us, the price has been dropping since August 2020, when the all-time high was reached. At the end of September 2020, we saw the first crossover when 21MA crossed under 50MA, indicating that bulls have lost theirs over a year-long strength.
In the following months, bulls tried to push the price higher but without any luck. The price touched the highest resistance area twice before bulls lost their power.
At the end of February, 21MA crossed under 250MA and a little bit over a week later 50MA crossed under 250MA as well, which indicates a strong correction or even a major trend change from Bullish to Bearish trend.
When using the RSI indicator, we check the divergence combinations. We take into consideration the current trend, and we are search divergences between the indicator and price graph.
(Picture 2. RSI indicator)
As we can see in the picture indicator shows the price is almost in the oversold area (white bottom area), and compared with the previous RSI low, we have a beautiful horizontal line. When looking at the price graph, we can see that there is a lower low instead of the horizontal line. This is called a divergence between RSI and the price graph.
Since we are in a downtrend, we must look at overbought areas (upper white area in the indicator window) and divergences in those areas to make a good investment decision.
Trendlines, Support, Resistance
(Picture 3. Trendlines, Support, Resistance)
In picture 3. we can see that the bears break the short-term trend line. The mid-term trend lines still bullish, and currently (15. March 2021), it holds its price with a support area. The long-term trend line is still bullish.
It is important to keep an eye on the mid-term trendline and support are. When bears break the mid-term trendline and also the first support level, we can expect a correction to the 1550-1560 USD area. When bulls break the 1750-1770 USD resistance area and hold, we can expect the price to move sideways for a while or try to reach new highs.
Long-term price analysis indicates that we are still in the uptrend and a bullish market. Mid-term and Short-term price analysis indicates that bears are getting more power and gold price might drop another couple hundred dollars before it starts climbing again.
In the current economic-global-climate, the gold price is strongly related to stimulus packets and Covid-19 outcome.
Disclaimer: This article is for informational purposes only and is not intended as an investment analysis or recommendation to sell or buy commodities. Tavex is not responsible for any decisions made based on this information. Investing is associated with opportunities and risks, and the market value of commodities can both increase and decrease. Past or future yields on the commodities and financial ratios shown above do not represent a promise or an indication of future earnings.