Gold’s Price Uptrend Continues - Pullback Buying Opportunities Ahead

July 18, 2020

New York (July 18)  Gold markets continue to push forward with prior uptrend movements and it’s likely that traders are now looking for specific price zones which can be used to establish new buying positions. Unfortunately, the upward surge in GOLD/USD has made it more difficult to locate suitable regions for new long trades. But this is precisely the reason that even long-term traders should remain cognizant of developments in the shorter-term chart histories because we are now seeing what could be the early stages of a price pullback that may prove to be suitable for new long trades in gold.

Specifically, it is important to identify instances of slowing momentum on the hourly charts because this is likely to be the only way to gain access to gold assets (at preferable valuations) within the current market context. Continued global uncertainties remain as long as the COVID-19 pandemic forces repeated lockdown measures and the International Monetary Fund (IMF) has already reduced its full-year forecasts for growth in global output levels (to -4.9%). Clearly, this is a macroeconomic context that supports the need for safe haven assets and this is precisely the reason gold and silver can resume their longer-term rallies once bullish momentum resumes on the hourly charts.

Rising indicator conditions on the 15-minute gold charts suggest that further declines in the underlying price of gold remain unlikely and this means support levels near $1,790 should continue to bring added precious metals demand from the market. These bullish readings in the Commodity Channel Index (CCI) have started to roll out of oversold territory and the higher lows created by the trend structure are projecting similar movements in the underlying price action. As long as these important support levels continue to hold, we should see buyers force prices higher with a weekly close above the $1,800 handle.

In SILVER/USD, we have identified similar technical scenarios as a short-term pullback has opened the door to better price valuations for long traders. Specifically, buyer demand near $19.10 should slow any further declines because a rising indicator reading in the Commodity Channel Index suggests that prices are ready to move higher once again. However, a break of support near these areas could slow the advance for the medium-term bull trend and this means traders should keep stop losses tight in order to be in a better position to establish long trades later (while markets are trading at lower valuations).

Another precious metals asset that is currently showing strong reversal conditions can be found in platinum, which has essentially flatlined in value since the middle of May. However, traders might note the strong bullish divergences that have started to develop in the Commodity Channel Index and this suggests platinum could be on the verge of a major break higher.

While these trends remain confusing to many analysts and experts in the precious metals community, weaker valuations in platinum should really be viewed as an excellent buying opportunity in the current market context.  In PLATINUM/USD, critical support levels have developed near $793.80 and traders can use this area to establish new buy positions in the event that further weakness develops in the price action.

Overall, we are seeing an important confluence of events here because all three of the major precious metals assets are showing strong technical signs calling for a rebound. It should not be a complete surprise for metals traders to see some level of bearish selling pressure, given the current valuations seen in the market. We are still trading near long-term highs and this has given many traders an opportunity to take gains before establishing new long trades at lower levels. As a result, we should expect to see some level of volatility in these critical support and resistance areas because this is likely where many of the market’s orders are currently placed.

On the fundamental side of things, a climate of lower global interest rates suggests that precious metals assets can continue moving higher as investors move out of stocks and high-yielding currencies. Downside revisions in global growth output suggest that interest rates could remain at historic lows for extended periods of time, and this means that there is simply less reason to hold onto these risky assets. As a preferred safe-haven, the precious metals complex is uniquely positioned to rally as long as these generalized market conditions remain under pressure. Central banks continue to add to their stockpiles of gold, silver, and platinum as a way of hedging against currency risks or massive devaluations in stock markets. As we continue to move ahead through the corporate earnings season, benchmarks like the NASDAQ and S&P 500 are trading near record highs and this puts traders at risk when their portfolios are heavily devoted to sustained volatility in equities markets. However, this is just another reason to move into tangible assets because there are many suitable types of valuable coins or notes that can be included as a physical resource in any diversified investment portfolio. Of course, it is always critical to maintain a high level of exposure in assets that are actually backed by gold, silver, or platinum and this is especially true today given the market’s tendencies to experience extreme volatility levels within the COVID-19 economy.


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