Markets

Technical analysis of gold as of November 23, 2020

By Markus Blaschzok for GoldSilberShop.de On the lookout – the time of purchase is getting closer!

Derivatives market: weakness in the last few weeks of trading

The net short position of the BIG 4 increased from 26 to 30 days of world production and that of the BIG 8 increased from 44 to 48 days. The price rose by 3 US dollars on the previous week, while speculators increased their net position by 11 thousand contracts. That is too little and shows weakness compared to the previous week. However, this weakness this week is due to the position building on the BIG 4 amounting to four days of world production. After the very weak previous week, this week would have shown relative strength, which was prevented by the BIG 4. The CoT index fell slightly to 22 points and thus deteriorated. The CoT index for small speculators fell from 90 to 89 points, which shows that many small speculators are still bullish, which should be seen as a counter-indicator. In the context of the QE programs, however, this should not be viewed so closely. Without QE that would be a very bearish indicator.

CONCLUSION: The futures market data has deteriorated and the price remained weak, as it was likely countered. The build-up of the net short position in the BIG 4 continues to irritate us, because before the Corona crisis this would have been a sure indicator of further falling prices. We ask ourselves whether these traders might know more and whether the markets will face even more deflationary pressure, which could push the gold price even lower? In any case, we have this warning signal in mind!

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The futures market data for gold are in the neutral area and showed weakness compared to the previous week

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The BIG 4 data shows an expansion in net short position by four days of world production

The gold price in US dollars is still or again in its downward trend. The US election caused a short-term upward outlier, but this was curbed again with the announcement of the first vaccine in the western world by Pfizer and Biontech. In the past weeks of trading, there was a physical oversupply on the market, whereby we were able to observe significant interventions in the futures market at times, which can be derived from the change in position of the four big traders.

The gold price is currently wedging – below the downtrend and above the support at $ 1,850, which has already been tested three times and successfully defended. Should the short-term deflationary environment intensify, this support could break on the next test. This would generate another sell-signal with a target at $ 1,800. I announced this correction target at the beginning of August before the first slump. In principle, our buy level would then be reached and we would close out our short positions. Should the environment deteriorate in such a way, we believe a final correction of up to around 1,750 US dollars is possible in the worst case. If, on the other hand, the downward trend were to be overcome in the course of new developments towards further quantitative easing or new stimulus packages on the part of governments, this would most likely mean the end of the correction phase and thus generate a buy signal in the medium term.

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The gold price is currently wedging – the downward trend is still intact

The daily chart shows that the 200-day line, at which a brief correction in a gold bull market usually comes to an end, is currently at 1,753 US dollars. In the worst case, we therefore see this support as an opportunity for countercyclical purchases with a very good risk-reward ratio at all time levels.

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The 200-day line currently runs at 1,750 US dollars

The gold price in euros is also still in correction in its overarching and steep upward trend. The 200-day line has already been reached, but cross-support for the upward trend channel is 1,515 euros per troy ounce. That price target would go well with a correction in gold to $ 1,800. At this cross support, we see a very good opportunity for a countercyclical short-term buy, which should then be provided with a stop loss.

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The 200-day limit has been reached, but the next cross support is only 1,510 euros

Intraday, the chart for gold in euros shows that there was another short-term sell signal when it fell below the support at 1,600 euros. The bulls drove the price up to this resistance again, but the bears were stronger here, whereupon a new price decline set in. This was a classic technical chart pull back to the breakout level and confirmed the short-term bearish picture. Gold is short below EUR 1,600 and the bearish picture would be negated above this level. As soon as the low at 1,570 euros is broken, the correction should accelerate. Overall, we currently see gold in the final phase of the correction and a new buy signal is now very close. It will be interesting at the turn of the year. So get ready to use the possibly final setback for countercyclical purchases, because the gold bull market will continue in the coming year!

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Gold is currently short below EUR 1,600 to EUR 1,510

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