Gold moved back above its downward sloping trendline
The price of spot gold has moved up 5 last 6 trading days (the one down day was just by $1or $2). The move to the upside took the price from the low on September 28 at $1614.92. The high price today has reached $1729.46. That’s a 6.7% gain over those 6 trading days.
Looking at the daily chart above, the price over the last 3 days has been able to extend back above what was a floor swing area between $1653 and $1690 (see yellow area in the chart above). The price today has also moved above a downward sloping trendline. That trendline cuts across at $1717.98. Bullish.
The last corrective high from September 13 at $1735.10 is the next upside target. Above that and traders will start to target the $1753.10 swing level (see green numbered circles followed by the falling 100 day moving average at $1762.99 (call it $1763). The last time the price traded above its 100 day moving average was back on May 22. The moving average was up at $1884 at that time.
The 38.2% retracement of the move down from the 2022 high reached in the beginning of March cuts across at $1789, and would be another target that would be needed to increase the bullish bias. The 38.2% retracement is the minimum retracement target that would give traders confidence that the correction is more than a plain-vanila variety.
Buyers are trying to take more control above the downward sloping trendline, but they have work to do on the daily chart to get out of what has been a bearish trend since the price peaked in March and near the swing high from August 2021.
Helping the gold move to the upside has been the declining US dollar
US Dollar
The US dollar, (symbol $, code USD) is the fiat currency of the United States of America (USD) and the most widely traded currency globally. It was introduced into the US in the late 18th Century, with paper notes not being distributed until the following century. The US dollar, also informally known as the greenback, is the world’s most foremost reserve currency, due in large part to the importance of the US economy on the world stage. Once backed by gold (in the 1900’s), the USD is now a purely fiat currency, i.e. not backed by a physical commodity. The former gold standard aligned to the US dollar, made both gold and silver the legal-tender coinage of the USA, with the guarantee that 1 USD could be converted to one and a half grams of pure 24 carat gold. However, the gold link was eventually abolished by President Richard Nixon in 1971. Since the gold standard was cut, the US dollar has become the world’s number one reserve currency.This means foreign nations possess large amounts of their cash reserves in USD, accounting for approximately 65% of the world’s foreign exchange reserves.How to Trade the US Dollar?The US Dollar is traded in a variety of ways, most notably on the foreign exchange (forex) market versus other currencies; traded as pairs. Any retail broker offers exposure to the USD in many exchange pairs, given its popularity and liquidity. The USD is involved in the majority of the most traded forex pairs, such as the EUR/USD, the USD/JPY, the GBP/USD and the USD/CHF, known as the “four majors”, and the “commodity pairs”, i.e. AUD/USD, USD/CAD and the NZD/USD.
The US dollar, (symbol $, code USD) is the fiat currency of the United States of America (USD) and the most widely traded currency globally. It was introduced into the US in the late 18th Century, with paper notes not being distributed until the following century. The US dollar, also informally known as the greenback, is the world’s most foremost reserve currency, due in large part to the importance of the US economy on the world stage. Once backed by gold (in the 1900’s), the USD is now a purely fiat currency, i.e. not backed by a physical commodity. The former gold standard aligned to the US dollar, made both gold and silver the legal-tender coinage of the USA, with the guarantee that 1 USD could be converted to one and a half grams of pure 24 carat gold. However, the gold link was eventually abolished by President Richard Nixon in 1971. Since the gold standard was cut, the US dollar has become the world’s number one reserve currency.This means foreign nations possess large amounts of their cash reserves in USD, accounting for approximately 65% of the world’s foreign exchange reserves.How to Trade the US Dollar?The US Dollar is traded in a variety of ways, most notably on the foreign exchange (forex) market versus other currencies; traded as pairs. Any retail broker offers exposure to the USD in many exchange pairs, given its popularity and liquidity. The USD is involved in the majority of the most traded forex pairs, such as the EUR/USD, the USD/JPY, the GBP/USD and the USD/CHF, known as the “four majors”, and the “commodity pairs”, i.e. AUD/USD, USD/CAD and the NZD/USD. Read this Term. I would think that gold would need more downside momentum in the USD to keep the price of gold
Gold
Gold is the most widely traded and important commodity. Prized for its historical importance and used for trading an exchange of goods, the gold market today is estimated at nearly $2.4 trillion.The value of gold fluctuates constantly, as it trades on public exchanges where it has a price that is determined by supply and demand. Gold has historically had tremendous significance and even today is extremely sought after. Gold has been used as a currency as it doesn’t corrode, and the material allows for some absorption of light creating a yellow glow, which lends the name yellow metal.Ultimately, institutional and retail investors buy and sell gold contracts or physical gold, thus creating the demand and supply flow.This can be pure speculation, to acquire or distribute physical gold, or as a hedge for commercial application. For day-traders, the purpose of trading gold is to profit from its daily price movements.How to Trade GoldDay-trading gold is speculating on its short-term price movements. Of note, physical gold is not actually handled or taken possession of, rather the transactions take place electronically and only profits or losses are reflected in the trading account.There are a number of ways to ultimately trade gold. Retail brokers typically offer exposure to gold through contracts-for-difference (CFDs).Beyond retail brokers, the main way to trade gold is via a futures contract. This represents an agreement to buy or sell something, i.e. gold at a future date. Buying a gold futures contract doesn’t mean you actually have to take possession of the physical commodity.Day traders close out all contracts (trades) each day and make a profit based on the difference between the price they bought the contract and the price they sold it at. However, on a futures exchange, gold moves in $0.10 increments only. This increment is known as a tick. It is the smallest movement a futures contract can make. If you buy or sell a futures contract, how many ticks the price moves away from your entry price determines your profit or loss.
Gold is the most widely traded and important commodity. Prized for its historical importance and used for trading an exchange of goods, the gold market today is estimated at nearly $2.4 trillion.The value of gold fluctuates constantly, as it trades on public exchanges where it has a price that is determined by supply and demand. Gold has historically had tremendous significance and even today is extremely sought after. Gold has been used as a currency as it doesn’t corrode, and the material allows for some absorption of light creating a yellow glow, which lends the name yellow metal.Ultimately, institutional and retail investors buy and sell gold contracts or physical gold, thus creating the demand and supply flow.This can be pure speculation, to acquire or distribute physical gold, or as a hedge for commercial application. For day-traders, the purpose of trading gold is to profit from its daily price movements.How to Trade GoldDay-trading gold is speculating on its short-term price movements. Of note, physical gold is not actually handled or taken possession of, rather the transactions take place electronically and only profits or losses are reflected in the trading account.There are a number of ways to ultimately trade gold. Retail brokers typically offer exposure to gold through contracts-for-difference (CFDs).Beyond retail brokers, the main way to trade gold is via a futures contract. This represents an agreement to buy or sell something, i.e. gold at a future date. Buying a gold futures contract doesn’t mean you actually have to take possession of the physical commodity.Day traders close out all contracts (trades) each day and make a profit based on the difference between the price they bought the contract and the price they sold it at. However, on a futures exchange, gold moves in $0.10 increments only. This increment is known as a tick. It is the smallest movement a futures contract can make. If you buy or sell a futures contract, how many ticks the price moves away from your entry price determines your profit or loss. Read this Term moving higher.
Looking at the dollar index (DXY) 4-hour chart below, the price today has dipped back below its 200 bar moving average on the 4 hour chart at 110.199. The current price trades at 110.08. Bearish tilt.
Of note is that back on September 13, the DXY bounced off that 200 bar MA line and later based at the 100 bar MA on September 19 before racing to the upside. Today’s break is the first since August 18.
Getting and staying below the 200 bar moving average on the 4-hour chart increases the bearish bias for the DXY which should also support the price of gold.It would take a move back above the 200 bar MA and the 100 bar MA at 111.33, to spoil the bearish party for the DXY on the 4-hour chart.
The next target for the DXY would be the 50% midpoint of the move up from the August low. That level comes in at 109.705. An upward sloping trendline is also near that retracement level increasing the levels importance. Breaking below 109.70 would be another bearish tilt.
The DXY index is back below the 200 bar MA on 4-hour chart
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This text was written byObserveThanks for studying my articles. I am an unbiased monetary author and Chartered Monetary Analyst. I beforehand labored for Constancy Worldwide and Bloomberg. My writing focus is on high...
