XAUUSD GOLD Forecast: Trend Reversal or Bulls' Trap

8 dic 2018

Fundamentals:

Aside from the U.S. dollar and equities,the chatter around the future of Fed rate hikes as the top drivers of gold next week

Markets believe that FED officials may revert to a “wait-and-see” approach after proceeding with another rate hike this month.

Under the evolving “data dependent” strategy, the Fed could step back from the predictable path of quarterly hikes it has been on for most of the past two years, raising the possibility it might delay rate hikes at some upcoming meetings, according to recent interviews and statements,

Next week, the markets are likely to continue digesting the soft U.S. employment figures, which showed that the economy only added 155,000 new positions versus the expected 200,000. However; the headline number was a bit weaker than expected, but generally, it still points to an economy that is in a fairly healthy shape. There are no signs yet of a severe slowdown. The unemployment rate is still at a 49-year low of 3.7%
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After nearing a five-month high on Friday, gold bulls are optimistic that positive momentum will be carried through to next week as markets scour for hints as to the Federal Reserve’s future monetary policy outlook.

Additionally, the markets hope that the supply-demand fundamentals are turning in favor of commodities for 2019, especially the metals. Palladium, Silver and Platinum can be considered as commodities since they have industrial use. The question is whether Gold would be able to take the advantage – or not – being a commodity without a significant industrial use? I am not sure. I am insisting on to invest in Palladium and published a few articles. I will update my Palladium forecast. Our main subject is Gold in this article.

Another issue is that Market participants continue to focus on genuine concerns over the current trade war between the United States and China and its effect on the global economy at large.

Another development worth watching for gold investors next week is the UK Parliament vote on Brexit this Tuesday. Some Gold investors think that Prime Minister Theresa May’s plan to leave the EU is rejected by British lawmakers, it could mean more political chaos. And Gold will rise as a safe haven.

That is true and I agree. In 2016, Brexit helped gold. And if this deal with the EU is voted down in the UK, that does open up all sorts of political uncertainty and we might see UK investors move into gold as a safe-haven,

A small note on Palladium. The new regulations in the U.S. may create more demand for catalytic converters in automobiles, which is bullish for the metal. We may have to see through a bit of pain in the first quarter of next year, if the global market has a bit of uncertainty, but I think if you manage your risks to the downside, palladium, building up a position in the first quarter of next year, is going to be a tremendous gain throughout 2019.

As a summary, Gold Bulls want to believe:

FED to slow down its rate hikes next year. Let’s pump the prices now!
Trade Wars will continue and Gold will shine as a safe haven.
Personally, I am a Gold Bull. However, I do not see any strong enough fundamental reasons – not the dreams, the facts – to invest in Gold. I prefer investing in Palladium rather than Gold. Gold prices will meet 1550 – 1620 USD / Ounce after Q2 2019. I would not invest in gold until the prices make weekly closings above 1308 $.

Let us take a quick look at the charts:

As seen on the Daily Chart, XAUUSD Gold is trading in a rising channel.

I will give you some key levels:

A firm daily closing above 1265 $ will confirm us the midterm trend reversal. I have a historical key level which will confirm me the end of the bearish trend: 1296 $.
We are at the top of the trading range. I have published a reversal pattern and I predict a bearish correction towards 1235 $. – Yes, Brexit is an important short term component of the story –
Firm daily closings below 1235 will confirm us the bearish continuation.