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Gold’s strong breakthrough of the 2000 integer mark will gather speculative funds, and more operations still need to be cautious!

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Gold’s strong breakthrough of the 2000 integer mark will gather speculative funds, and more operations still need to be cautious!
Independent Analyst: Ling JianQi


Fundamental Analysis:
On August 5, local time, US Secretary of State Pompeo stated US would like to see “untrusted” Chinese apps removed from US app store, calling China-owned TikTok and WeChat are “significant threats.” In announcing what he called US’ efforts to expand the establishment’s hard work of a “clean network,”Pompeo said that Washington will work to prevent various Chinese applications and Chinese telecoms from accessing sensitive information of US citizens and business.

At the same time, US Secretary of Defense Esper stated at the annual security forum video seminar held by the Aspen Institute in Washington, the Washington think tank, that the focus of the Pentagon is now on competition with China. China is a competitor i the Pacific, and even a global one. He wants to ensure that US military capability is always ready for war. Once it must respond, it must be defeated.

Worldometers world real-time statistics show that as of August 5, the cumulative number of confirmed cases of COVID 19 in the world exceeded 18.95 million; the confirmed cases of COVID 19 in US is the world’s largest, exceeding 4.97 million, and the deaths exceeds 161,000. The forecast model release by CDC shows that by August 22, more than 173,000 Americans will die. The American Association of Medical Colleges issued a warning last week that if the response model is not changed, the death toll in US may soon become hundreds of thousands, “rising like a rocket.”

China-US relations continue to deteriorate, and the market’s rise aversion sentiment is high; however after the US dollar loses its technical structure, it is not high enough to attract cheap buying; after the continuous influx of funds into the gold market, push the gold price above the 2000 round mark, the vacuum zone effect will gather more short-term speculative funds, which will help gold prices maintain their inertia and continue to expand upward!

Technical Analysis:
Currently as the gold price broke the 2000 integer mark and the extension was accelerated, the long order trend is popular in market again. Moreover, the top passivation structure disappeared again, which is already the continuous second disappearance, the compelled increase shows multi-advantages and restricted technical analysis methods.

Just as before, under the condition of the volatility of gold price in high-end causing the lack of confidence, and the structure of gold price appears “signs of divergence” or “top passivation”, we tend to extend the time window for analysis and reference. This is due to the limitation of the short-term analysis method. Currently the gold price has stepped into a new area of price cognition, and the vacuum zone will further limit the construction of the technical structure. At most, we can only operate according to the psychological inertia or speculative capital inertia.

On the weekly-chart, the gold price is still maintaining an upward trend pattern. The accelerated performance in recent weeks is favorable for the uptrend extension. Moreover, if it is divided by the trend bands, it is currently subordinate to the extended market performance of the three waves of driving. The extension of the small 5 waves in the future is expected. The establishment of the medium-term pattern will attract mid-line buying interventions, which is favorable to the expectation and performance of the uptrend of the gold price.

We have to be careful of the possibility that the ‘history to be repeated’. At the time that the gold price first reached to the 1000 integer mark in 2008, the market shows an obvious error correction to the gold price. After that, it entered a relatively large level of adjustment (adjustment level over 30%). It is then truly recognized by the market through corrections of time and price period. After then it enters to a new stage of bull market extension.

Although the current gold price has broken through the 2000 integer psychological barrier, and the basic support effect is also relatively obvious, we cannot assure that the new price level platform has already been accepted by the market. Together with the accumulation of profits and the existence of serious overbought, we need to be careful of the possible ‘historical repeat’!

Investment Strategy:
1. Around $2,050-2,057/oz take a short position. Apply the stop loss at $2,063/oz, target at $2,010-2,030/oz;
2. If it effectively falls below 2000 integer mark, take a short position after rebound. Apply the stop loss at $2,010/oz, target at $1,965-1,985/oz.

This article also covered in the Guo Ji Ri Bao newspaper issued on August 7, 2020.