Deception in gold. What to believe and what to do?

Deception in gold. What to believe and what to do?

This week was extremely volatile for gold. Frankly, it’s hard to immediately remember when the asset was shaking like that: 60 dollars up, and then 70 dollars down, and all this for almost a day. A logical question arises, who will win - bulls or bears. And accordingly, what to do with gold: buy or sell.

To answer this question you need to understand the causes of movements and countermovements.

The basic movements (rising gold) were derived from the facts: the assassination of Soleimani, a sharp escalation in US-Iran relations, and shelling of the US military base by Iran. Do not forget about purely technical issues - taking an important resistance level of 1550.

As for the counter-movements, they were the result of expectations and emotional reactions. Trump's reassuring speech really reassured, and traders rushed to take profits (a lot by the way), which gradually turned into the opening of short positions.

Total, in our opinion, the facts are definitely on the side of gold purchases. We will not list all the possible reasons for the growth of gold, we note only the main ones.

Fact No. 1. General Soleimaniis dead. And the United States killed him. Trump's statement about the US’s reluctance to provoke a further escalation of the conflict does not cancel the fact. As an additional fact, we cite the following: The BLACKROCK INVESTMENT INSTITUTE Geopolitical Risk Index is at the highest levels in the entire history of observations.

Fact No. 2. Iran has shown an act of open military aggression against the United States, attacking US military bases in Iraq. The fact that the attack was known in advance and there were no casualties does not cancel the fact of open military aggression.

Fact No. 3. Despite the bear’s attempt to push the 1550 mark, yesterday closed above 1550. This means that this level is still supportive and the path to gold growth is still open.

As additional arguments, we recall that the zero and negative interest rates of the world's leading central banks make investments in gold more and more attractive. Price bubbles in stock markets around the world are about to burst (Buffett indicator is storming historic highs, which does not bode well) and investors will flee from them not only to bond markets but also to safe-haven assets.

Overall, it is imperative to distinguish facts from expectations. The facts are definitely on the side of gold purchases. Thus, taking into account all of the above, buying gold is an excellent trading idea, the potential of which amounts to tens of percent. Recall that we consider the target of the current upward movement mark $1800.