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Gold Hits The Psychological Threshold of 2000 For The First Time and Will Face Greater Pressure

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Gold Hits The Psychological Threshold of 2000 For The First Time and Will Face Greater Pressure
Independent Analyst: Ling JianQi


Fundamental Analysis:
On the morning of July 30, the Federal Reserve chose to keep interest rates near zero and stated that they would keep interest rates near zero until the employment rate rebounded. The Fed stated that monetary policy will depend on the development of the pandemic in the coming months.

Furthermore, Fed Chairman - Powell chaired the press conference and said: At present, the increase in interest rates is not considered at all, and the contraction of US GDP in the second quarter could reach record highs. Powell further stated that adopting a fiscal policy is needed to resolve problems that cannot be solved by the Fed.

At the same time, Republicans in the White House and the U.S. Congress fell into chaos over their own $1 trillion coronavirus aid plan, and negotiations to reach a compromise with the Democrats also fell into a deadlock.

The recent bearish of the US dollar has become the biggest boost of gold, and the released interest rate resolution is highly "dovish", and its support for the US dollar is relatively limited. while the US coronavirus pandemic continues to rebound, the market worried about the second outbreak of the US pandemic, which lead them to be cautious about the prospects of the US economic recovery. In addition, the continued deterioration of China-US relations, the existence of risky factors such as political disputes will also drag down the performance of the US dollar, which in disguise will highlight the dual advantages of gold as safe haven and investment asset. Therefore, be cautious about the correction and adjustment space of the current gold price!

Technical Analysis:
On the weekly chart, the price of gold maintains the overall uptrend pattern. If gold is divided by the trendline, it is still affiliated with the acceleration of wave 3 extension market performance and accompanied by a clear profit speed. There is hope to maintain the inertia of the expansion of the upward movement and will form wave 5 which are expected to expand. But at the same time, at this time of small wave 3 room for extensions are sufficient and the weekly time is long enough, especially close to the $2,000 mark of a psychological integer. Besides, the price of gold has been in the overbought area for some time and there are technical corrections and preparations for serious overbought. Therefore, investors are reminded to beware of the wave 4 of adjustment risks when gold starts to correcting.

On the daily chart, the gold market of around 1451 has formed a V-shaped reversal structure, the return of the ascending trend has been set, after the rampant high-end platform turbulence has consolidated the support of the upward relay structure in this area, the upward extension will continue. This is somewhat like a high-level market trend extension, and because of the obvious increase in speed, this might refer to the construction of a high-level expansion trend wave, therefore, the boundary structure extension chart near $1,984/oz will be a major reference concern. If the price of gold can break through this zone and accelerate or trend towards a new trend, the small wave 5 extension structure is expected to challenge above the 2000 integer mark. However, if it continues to be restrained and there will be greater restrictions near the psychological threshold of 2000 integer. It is possible for the market to release the market a faster momentum.

Of course, because there are many factors that are favorable for gold at the moment, the accumulation of risk factors has a great chance to ignite the explosion of gold prices again, making it “easy to rise but difficult to fall” psychological suggestion and restrict its level of adjustment; but just like history of the first time gold hit the 1000 integer mark, it will not go smoothly. It needs a certain momentum to accumulate before it can truly effectively break through and stabilize. Since gold has continued to rise in the past six months, there were no reasonable time to adjust the momentum release, so be cautious about gold's effective breakthrough of the psychological threshold of 2000!

Trading Tactic:
(1) Around $1,933-$1,940/oz take a long position. Apply the stop loss at $1,928/oz, target at $1,955-$1,970/oz;
(2) Around $1,978-$1,985/oz take a short position. Apply the stop loss at $1,990/oz, target at $1,948-$1,963/oz.

This article also covered in the Guo Ji Ri Bao newspaper issued on August 3, 2020.