Would Gold continue the unstoppable rally since late of March?

2020년 4월 16일

The rally of gold had obviously lead by several reasons such as the investor's fearful on the global economy recovery after the covid-19, the unlimited quantitative easing and bail out policy by the FED, the great uncertainty of geopolitical tension among the middle east and China-US, as well as the instability of the "Asia Financial Hub" - Hong Kong since 2019. Investor tends to adopt more risk aversion investment strategies and the precious metal like gold and silver, the traditional safe haven, has been getting more attention since 2019.

Starting from 2020, we are delighted to receive good news by the long lasting trading deal between China and US has been settled by a Phase 1 deal in January. However, the covid-19, as known as the black sweans, had crashed the global market immediately after the deal has been signed. Upon the largest historical slumped of the world's financial market in Feb and March, followed by the quickest recovery in April in responding the largest quantitative easing and bail out policy announced by the FED, possibly to be a $6 trillion package, market make the responses disregarding the real economy impact under the global broader shutdown, which still in effective, and the difficulties of debts repayment by the enterprises. Unemployment rate had rises followed by the historical largest amount of initial unemployment claim for nearly 16 million citizen in US from past 3 weeks. In my point of view, I don't see a quick, sharp V-shape economy recovery as Janet Yellen said, instead Ben Bernanke raise up a depression view which would be possible to align with the current economic conditions, both the Former Federal Reserve Chairman.

Besides the economic view, the liquidity of the financial sectors has been caught more investors attention. Although the FED had announced it's historical largest bail out package, the global shutdown has strongly impacted the countries' trading balance, local unemployment rate and bank liquidity as more enterprises has to be fall by lack of free-cash-flow in operation. Frankly, the Government could not save all of the enterprises during this period, the cases from the credit default among entities will rise significantly start from Q2 which lead to the liquidity problem among the banks and insurer, by a more tighter dividend and buyback policy issue by the EU and UK among it's financial sectors, no doubt that the impact of the covid-19 on global liquidity would last for at least one more quarter from now. Investors should not be enthusiastic on aggressive trading strategies and be caution on recent high volatility market.

Hence, I believe the gold can provide a more stable and risk aversion choice to investors which we can see by the rally of gold prices since 20 March. The rise of gold price from $1450 to $1750 was stunning, the modified pitchfork was being more evidential support for the rally of gold. Furthermore, by observing the previous trading pattern on RSI, gold price faces a short rebounce when RSI reaches 80, this could provide a more uptrend opportunities as currently trading at 60. By breaking through the resist of $1700, followed by a short consolidation break on top of it, next target of gold could possibly be $1860, the 1.618 of previous decline in mid-March.
Looking forward to see gold reaching the price within this month.

2020년 4월 17일

노트

Uptrend broke, a consolidation period around $1,700 by a 0.382 (approx. $68) rebounce from $1,750 to 1,682 (recent low), follow by a $180 rally since $1,570.

I believe the consolidation will continue for a while between $1,680 to $1,700, or even lower at $1645, a 0.618 rebounce which also be the previous horizontal range movement, but highly unlikely as my observation since the Gold had breakthrough $1,700, the 8-years recorded high.

Continue to long gold as the main factors among economical, geopolitical and during the high volatility market as risk aversion strategies.