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The Retraced Adjustment of The Gold Price to A New High, Initial Target may be The Pullback Confirmation Near The 2000 Integer Level

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The Retraced Adjustment of The Gold Price to A New High, Initial Target may be The Pullback Confirmation Near The 2000 Integer Level
Independent Analyst: Ling JianQi

Fundamental Analysis:
The data released by the United Sates Department of Labor last Friday shows that 1.76 million non-farm employment is increased in July. The previous forecast predicted an increase of 1.6 million employment. There was a record increase of 4.791 million employment in June.

On August 8 local time, US President Donald Trump signed four executive orders, extending some of the rescue measures. The orders include extending enhanced unemployment benefits and the federal eviction moratorium, imposing a payroll tax holiday and further suspending federal student loan payments. One of the orders extend enhanced unemployment benefits at a rate of $400 per week.

The Foreign Ministers of Australia, Canada, New Zealand, and the United Kingdom, and the United States Secretary of State released a Joint Statement on August 9, urging China to fulfill the “One Country, Two Systems” promise and urging the Hong Kong government to hold the elections as soon as possible.

According to a report by the South China Morning Post on Monday (August 9) , the US Health Secretary Alex Azar arrived in Taiwan on Sunday, making him the highest ranking American official to visit the island since 1979.

The US Non-Farm Payrolls last Friday exceeded than expected, a certain support is therefore given to the US dollar. At the same time, there will be adjustment for the gold price from historic new high. Due to the continuous worsening US-China tension, there is still huge requirement seeking for the risk-havens in the market. The support to the gold price is relatively obvious. Therefore, as long as there is a relative level of adjustment, the resilience of gold price will be highlighted, and the mid-line uptrend extension will continue.

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.

It should be noted that the gold price has entered the overbought area for a period of time. More profit is accumulated due to the continuous upward trend and the breakthrough of the 2000 integer level. Technically, there are needs and preparations of the correction. In addition, after the successful breakthrough of the 2000 integer level, there is not yet any test for the pullback confirmation. With the gold price correction inertia of last Friday, there may be test about stepping into the 2000 integer level recently.

Apart from the need for confirmation of the pullback of the psychological level, 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%). Currently, although the gold price successful broke through the 2000 integer level, there is insufficient high-end follow-up. In addition, after the adjustment of the US dollar, it will reflect a certain attractiveness of cheap buying, which may limit the uptrend extension and the space of the gold price.

Investment Strategy:
1. Sell in range of $2047-2053/ ounce, stop loss at $2059/ ounce, target at $2010-2030/ ounce
2. If it effectively falls below 2000 integer mark, it can be sold after a rebound, stop loss at $2010/ ounce, target at $1965-1985/ ounce.

This article also covered in the Guo Ji Ri Bao newspaper issued on August 11, 2020.