Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Chart Of The Day: What Is Driving The Gold Price?

By Investing.com (Pinchas Cohen/Investing.com)CommoditiesMay 17, 2022 15:07
ng.investing.com/analysis/chart-of-the-day-what-is-driving-the-gold-price-112658
Chart Of The Day: What Is Driving The Gold Price?
By Investing.com (Pinchas Cohen/Investing.com)   |  May 17, 2022 15:07
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Gold has been weighed down since March when the Federal Reserve raised interest rates for the first time since 2018.

The yellow metal continued to fall as the Fed was getting ready to increase rates at a faster rate.

Finally, the Fed raised its benchmark interest rate by 0.5 percentage points earlier this month, the sharpest increase since 2000 and analysts expect the Fed to raise rates seven times in 2022.

However, gold has been rebounding since Friday amid a decline in the dollar.

Gold Daily
Gold Daily

Now, let us take a step back and look at the bigger picture

Gold Weekly
Gold Weekly

There are two primary technical forces. One is driven by a rising demand for the yellow metal amid the worst inflation in over four decades, with concerns that the Fed interest rate hikes will actually cause a recession. In this scenario, the precious metal is a hedge against inflation.

The other force is supply overcoming demand. Note that when the contract started falling, the March peak registered a lower high than the August 2020 record peak, suggesting that bears are in charge. The long-term trend is still up, as determined by the direction of the peaks and troughs. Only a trough lower than the one in March will establish a downtrend.

A stricter interpretation will demand a minimum of two peaks and two troughs, independent of the uptrend.

Meanwhile, both the Relative Strength Index, measuring momentum, and the Moving Average Convergence Divergence, measuring pricing, have fallen below their supports, suggesting the rising channel will break, increasing the chances the price will fall below the March low, completing an oversized Double Top.

So, which trend will win?

We don't know. All traders can do is manage risk and trade according to their style. Aggressive traders can go long on the intra-weekly bullish hammer at the bottom of the rising channel, knowing it could backfire and fall as it completes a massive Double Top. To sort itself out, cautious traders can wait for the long-term trend—sideways now.

Trading Strategies

Conservative traders should wait with a long position for a peak above the record August 2020 high or for a new low to short the commodity.

Moderate traders could go long if the daily chart posts a series of rising peaks and troughs to synchronize with the weekly rising trend.

Aggressive traders can enter a long position, counting on the rising channel and the weekly hammer, though the candle's bullish call will go into effect only after the weekly close.

Since trading is nothing more than "luck management," instead of knowing the future, money management is the key to success. Here is an example:

Trade Sample

  • Entry: $1,800
  • Stop-Los: $1,775
  • Risk: $25
  • Target: $2,000
  • Reward: $200
  • Risk-Reward Ratio: 1:8
Chart Of The Day: What Is Driving The Gold Price?
 

Related Articles

Fawad Razaqzada
Chart Of The Day: Gold Eyes $1,900 By Fawad Razaqzada - May 27, 2022

Gold and silver remain on course to end higher for the second consecutive week after ending their 4-week losing run as the US dollar and bond yields, including the 10-year Treasury...

Chart Of The Day: What Is Driving The Gold Price?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email