Technical Analysis of Gold
If you have been investing in gold during the past few months, you would have made profits that are nearly unheard of on stock exchanges under current market conditions.
If we look at Fig. 8.24(a) we see that, after a period of sideways trading, gold emerged from the Ichimoku Kinko Hyo cloud on the 6th of July and closed at 1528.75. After that, it was a bull run all the way, except for a few relatively minor price corrections. On the 23rd of August, it briefly touched 1906.75 before profit taking forced it down again.
One of these corrections occurred between the 11th and 14th of August when we saw the price decline from 1792.85 to 1740.45 over the course of three days. On the 23rd of August, we saw another, quite severe, price correction: the price opened at 1906.75 and dropped to 1823.25 during the day.
If we look at the bigger picture, we see that the price is currently far above the Ichimoku cloud. It is also above the red Tenkan Sen and the blue Kijun Sen – indicating that even on the short term the bull run has not been broken.
The green Chinkou Span is also well above the price 26 periods ago, showing that on the medium term we are indeed seeing a bull market.
A cautious trader would wait until the price breaks through the recent high of 1906.75 again before entering a long trade. Depending on your trading strategy, if you are currently in a long trade and the market drops below the blue Kijun Sen line, it might be time to re-evaluate your situation.
Only day traders will be looking for short trades in the present market. Any drop below the red Tenkan Sen line could indicate a good entry point for a brief short trade on a day-trading basis.
Medium term outlook
The continued economic woes in much of Europe, the credit downgrading of the USA, and the political uncertainty in the MENA region all point to continued demand for gold in the short to medium term. We could see significant price corrections, but should these conditions continue, we will most likely see the gold price moving closer to 2,000 over the next few weeks.
Spread betting and CFD trading carry a high level of risk and you can lose more than your initial deposit so you should ensure these trading products meet your investment objectives and if necessary seek independent advice.