[Free Article] Gold Price Analysis

※This article does not instruct or recommend buy/sell timing.

Please make your own investment decisions.

I don’t usually touch on this, but I happened to talk about gold, so I’m turning it into an article.

Some sources have announced a休み (holiday) from June 7–10, so I’ll fill gaps with consecutive posts.

※ You may notice there are many articles, as some of you might.

Assumptions

✓ The economy is in a recovery phase.

→ From various indicators, the world economy is moving toward a recovery from the COVID-19 era.

There are differences in progress by country, but the vector is toward that phase.

✓ As a characteristic of currency, it has a strong element of value preservation

→ Because many countries adhered to the gold standard, currency can be viewed as gold.

It isn’t guaranteed by the government, but one could say that the world’s people collectively guarantee its value to some extent.

✓ There are no interest earnings; it is only a “preservation” element

→ Since the government does not guarantee it, there are no interest earnings.

Long-term outlook

The indicator below shows the real interest rate, which is nominal interest rate minus expected inflation rate.

You can see it is inversely correlated.

This is expected inflation rate

As inflation rises, there will come a phase where rate hikes are used to curb it, so it is not realistic to expect it to rise unconditionally, and we can see it currently staying near the upper bound.

Because nominal rate − expected inflation = real interest rate, when gold rises, you need to drill into real interest rates.

In other words, either expected inflation rises to create a negative, or nominal rates fall to deepen negative, or both.

As mentioned above, the rise in expected inflation is already limited, and it seems almost static.

it is reasonable to view that the ceiling has already been reached or is around 2,000 dollars.

They won’t match perfectly, so there can be some upside movement, and they may not reach at all, but it will fall within a close approximate range, hence this phrasing.

US interest rate movement

Now, regarding the important movement of US rates, this year is expected to be a year of distortion, with a lot of back-and-forth as in the tapering discussions.

However, looking ahead, it seems reasonable to expect a gradual rise in US rates, and over a five-year horizon, they are likely to move higher.

This is because in strong economic times investors tend to take risk positions, funds move out of relatively safe assets like bonds into risk assets such as stocks and commodities, so portfolio construction tends to reflect that trend.

Environmental recognition

Three important price levels

From the top

① The highest price at 2,075 dollars

② The high around 1,915–1,920 dollars, rising from the Lehman Shock era

③ The most recent push-back horizontal line of this trend

Currently, this price level is a relatively long-period resistance line when viewed over a long timeframe.

Yesterday’s drop was repelled by the horizontal resistance at the high from ten years ago.

And finally, the price level close to 1,874 dollars, the halfway retracement from the high, is often watched as a psychological level.

Timeframe environmental recognition

There was a textbook head-and-shoulders pattern, which accelerated downward after the neck break.

Currently, it can be seen as in a return-move phase.

The rise in rates led to position adjustments toward indicators, the dollar strengthened, and after the announcements, concerns about tapering increased, so the market favored selling and prices fell.

The stopping point is the support line that had held for a while.

As a support line, it is expected to function; a break below here would be a turning point where sentiment heads downward.

Technical analysis

Although upper levels have not been reached, a channel band is set with this width.

Currently trading within the green channel, with a daily edge leaning long.

Watch around the horizontal at about 1,874 dollars.

Since it is currently a resistance level, it must be broken above for this discussion to continue.

And another around 1,890 dollars

It is the tip of the last two weeks and also the neck line, so it will function as resistance.

Normally, in this pattern, selling would enter at a pullback here.

Summary

From a medium- to long-term perspective, I would like to maintain a bearish view.

Gold's return move driven by a dollar weak- environment stopping at the high from ten years ago was a fairly good place, in my view.

The triple-top breakout on the timeframe is clean, making pullback selling easier.

However, recently there has been a bullish tendency with return moves, so in day-trade terms, this morning’s low could be used as support near 1,874 dollars or aiming for 1,890 dollars as a long setup.

The strategy is simple: since price is near 1,874 dollars, either push through and aim for a roll reversal, or if it fails and breaks lower, enter on the lower high with a trailing stop to cut the loss.

Alternatively, wait for a return to the neck line and confirm a rebound to look for shorts; strategies can be easily laid out.