Gold Long Term Analysis Nov 15
I published some trend analysis using the adaptive trend finder 2 weeks ago. I wanted to revisit this given the eventful couple of weeks we've had.
The previous analysis highlighted an ultra-strong uptrend over the previous 20 weeks on the weekly chart. Prior to the election, the rally in gold the price showed little sign of slowing down. In the last two weeks we've seen a fall in the gold price of 1.9% and 4.5% (the largest drop since 2021). Apart from the obvious, there appears to be several factors leading to the drop.
Essentially, the gold price is being weighed down by expectations on policies that are potentially months aways and stronger than exepected economic data. Jerome Powell also indicated in his speech that the Fed sees the pace of rate cuts slowing down in the near future.
Whilst higher inflation is typically seen as a positive for the gold price (gold as an 'inflation hedge'). Higher inflation is accompanied by higher interest rates which act as a negative for the non-yielding asset.
Last week's close broke the established 20 week price trend there is, however, a longer term trend that can be observed over the last 60 weeks. Last week's closing price respects this trend. Whilst the expectation of a technical correction hadn't eventuated, we may find that this is the bottom of the dip as long as there is not further negative news for gold. Central Bank and ETF demand is still strong. A shift from gold to risk assets following the Trump election does remain a risk for the short-term gold price.
There are a couple of key resistance points to watch this week to understand whether this is the bottom of the dip. I'll explore this in another post.
The previous analysis highlighted an ultra-strong uptrend over the previous 20 weeks on the weekly chart. Prior to the election, the rally in gold the price showed little sign of slowing down. In the last two weeks we've seen a fall in the gold price of 1.9% and 4.5% (the largest drop since 2021). Apart from the obvious, there appears to be several factors leading to the drop.
- Donal trump's emphatic win and a number of his stated policies that could see interest rates stay higher for longer (think tarrifs, tax cuts)
- Economic data that came in inline with expectations
- A rate cut that had already been fully priced in
Essentially, the gold price is being weighed down by expectations on policies that are potentially months aways and stronger than exepected economic data. Jerome Powell also indicated in his speech that the Fed sees the pace of rate cuts slowing down in the near future.
Whilst higher inflation is typically seen as a positive for the gold price (gold as an 'inflation hedge'). Higher inflation is accompanied by higher interest rates which act as a negative for the non-yielding asset.
Last week's close broke the established 20 week price trend there is, however, a longer term trend that can be observed over the last 60 weeks. Last week's closing price respects this trend. Whilst the expectation of a technical correction hadn't eventuated, we may find that this is the bottom of the dip as long as there is not further negative news for gold. Central Bank and ETF demand is still strong. A shift from gold to risk assets following the Trump election does remain a risk for the short-term gold price.
There are a couple of key resistance points to watch this week to understand whether this is the bottom of the dip. I'll explore this in another post.
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