Markets

What’s next for gold in 2021? Big technical outlook for the year – columns

In the middle, not at the end of the trend!

“Politics is the art of the possible”, Otto von Bismarck once said. Applied to technical analysis, charts could therefore be called “the art of the probable”. A year ago it was likely that the gold price should capitalize on the bottoming out in 2019. With our headline: “The beginning of a new rally”, we summed up these expectations. Although we landed an absolute forecast hit thanks to the new all-time high of USD 2,072, a realistic view of the rearview mirror includes that the March setback on the way there put the nerves of precious metal investors to a hard test. To put it in the words of another ex-Chancellor and with a healthy amount of self-reflection: “Everything that works well is explained as a strategy in retrospect (Gerhard Schröder)!” So the year 2020 was everything on the precious metal and raw materials side other than a sure-fire success. After all, the silver price had to cope with a new low (USD 11.62) before the brilliant rally later in the year – not to mention a dip in the oil price into negative (chart) territory.

Gold (annually)

Chart gold

Source: Refinitiv, tradesignal²

5-year gold chart

Chart gold

Source: Refinitiv, tradesignal²

A lot is possible on the stock exchange – even the opposite!

It is precisely in such extreme situations, which are often dominated by market psychology, that technical analysis provides investors with an important, sometimes perhaps even the only, guide. In view of the great uncertainties in the financial markets, record low or even negative interest rates and global economic stimulus programs, we see structural price drivers for the precious metal markets. But we want to focus very deliberately on the technical framework for gold, silver and co. With a look into the “big glass ball” we would like to give you possible fixed points and a clear, comprehensible timetable for the coming year. The old miner’s saying: “It’s dark in front of the hoe” is nowhere more true than on the precious metal and raw material side. That is why we will critically scrutinize our timetable over the course of the year. We will inform you about any “delays in the operational process” or even deviations from the plan in “Daily Trading”. So it is worth following our newsletter regularly! To shed light on the aforementioned darkness, we start our outlook with the analysis of the annual chart of the gold price.

Gold (annually)

Chart gold

Source: Refinitiv, tradesignal²

Highest year-end price in history

Basically, we would like to warmly recommend you, dear readers, the analysis of long-term charts and high time levels. Aside from the hectic “ups and downs” in the daytime area, the big trends can often be identified with the help of high time units. Investors should understand this statement as a fiery plea for the benefit of long-term chart viewing, because “everything ends well for those who can wait.” On an annual basis, the gold price provides impressive evidence of this Tolstoy quote, because the almost congruent highs of the years 2014 to 2018 underline the strategic importance of the sprint above the mark at USD 1,370. The gold price in 2020 was able to further capitalize on the long-term bottoming out that was thus completed. The reward was a new all-time high of $ 2,072 in early August. There is, however, a small fly in the ointment: the precious metal was unable to save this record all the way across the finish line. Rather, the gold price had to give up the old all-time high of September 2011 at USD 1,920. Nevertheless, the highest year-end closing price in history is very likely (as of December 4: USD 1,834; see chart).

Gold (annually)

Chart gold

Source: Refinitiv, tradesignal²

The next big target

In striking distance of the old record high and against the background of the trend-following nature of TA, technically motivated investors cannot really start the new year “bearish”. The quarterly chart of the gold price serves as evidence for this thesis. Two long-term price drivers can be identified here. On the one hand, the multiple S-K-S formation of the year 2019. Since their imputed minimum price target of 1,670 USD has already been clearly exceeded, investors can tick this price pattern again immediately. On the other hand, the price development from 2011 to 2019 can be interpreted as an elongated correction flag (see chart). The dissolution of the consolidation pattern described thus signals that the base upward trend has been picking up speed again since the beginning of the millennium. The imputed target price from the (upward) trend-confirming flag can be estimated at around USD 2,280. This level goes well with the former base uptrend since the beginning of the millennium, which will be at $ 2,308 at the start of the new year. Together with the 138.2% Fibonacci projection of the entire bear market from 2011 to 2015 (USD 2,254), a striking bundle of technical charts is created.

Gold (quarterly)

Chart gold

Source: Refinitiv, tradesignal²

Long-term even possible USD 2,500

If investors interpret the price development from the end of 2012 to mid-2020 as a “rounding bottom” (see chart), then – derived from the height of the formation – there is even a long-term connection potential of up to around USD 2,500. This price pattern brings us straight to the point of risk assessment in the sense of the cautious businessman, because the quarterly chart also provides important assistance with strategic hedging. First of all, the distinctive wick of the candle from the 3rd quarter or the “inside candle” from the last three months of 2020 signals the need to deal with money management. The key role is played by the neckline of the above. Rounding bottom at USD 1,800. The rebreak of this mark and thus the counteracting of the lower reversal must be prevented in the future. The key level even has another dimension: Already at the end of 2011 and in the course of 2012, this level had played a role again and again. On balance, we therefore estimate the importance of the 1,800 mark to be significantly higher than the relevance of the old all-time high of 1,920 USD. This tight stop loss ensures an attractive risk / reward ratio for new gold long exposures.

Gold (quarterly)

Chart gold

Source: Refinitiv, tradesignal²

Heikin Ashi: Valuable insight

We would like to further clarify the outstanding position of the 1,800 mark with the help of the Heikin Ashi chart. This type of chart display is based on the formation of averages. In this way, the methodology already takes into account the trend-following character of the technical analysis in the calculation basis. Since the prices are based on mean values, trends can often be identified more clearly. The HA monthly chart allows three main conclusions to be drawn for the current assessment: Firstly, on the basis of Heikin Ashi, the precious metal achieved a closing price above the record high of 2011 in August. Secondly, the gold price has since developed some inner bars, i. H. the monthly range remained within the guard rails set in August. This gives the latest price development the features of a healthy consolidation. Points 1 and 2 are therefore to be interpreted as being bullish. The third gain in knowledge relates to the “disaster stop” at USD 1,800. In the Heikin Ashi chart, this support results not only from the highs of 2011/12, but also in the current year – especially in June and August – this level played a role (see chart). If this bastion breaks, the above-mentioned Inside bars finally resolved negatively!

Gold (monthly)

Chart gold

Source: Refinitiv, tradesignal²

New momentum: from when?

The annual pivot point ($ 1,787 as of December 5th), i.e. H. the mean value of the annual high, the low and the closing price provides a final technical exclamation mark behind the importance of the strategic hedging at around USD 1,800, which has now been repeated almost like a mantra. With this we want to leave the risk assessment for good. Rather, at the end of the gold consideration, we would like to give you signal marks for the new year, from when the consolidation of the last few months should be completed and the long-term gold price target of USD 2,280 should be targeted again. In principle, the recent respite gives reason to be optimistic. Without having to reveal too much terrain, this takes a familiarization process. So investors are given the opportunity to acclimatise and familiarize themselves with the high prices in the area of ​​the old all-time high. The traffic light jumps back to “green” when the gold price leaps over the last high of 1,965 USD. From the perspective of the weekly chart, a completed flag consolidation would then also be available (see chart), which lays the foundation for an attempt at the strategic target of USD 2,280.

Gold (weekly)

Chart gold

Source: Refinitiv, tradesignal²

Seasonality: Drought divides two strong phases

In the next step, based on the US presidency cycle, we examine the influence of the “seasonality” factor on the development of the gold price. The good news first: the average development of all US post-election years since 1973 is characterized by a clear increase in share price. The seasonally favorable environment is also reflected in the hit rate. While the gold price rose in eight out of 12 post-election years, the precious metal only suffered price losses in four cases. We would like to highlight the strong phases from late January to early June and from mid-August to late December (see chart). The second section corresponds perfectly with the basic pattern on the precious metal markets, according to which the gold price can benefit from a seasonal tailwind in the last months of the year. However, the two cyclically favored phases are interrupted by a seasonal drought period in midsummer. The typical pattern of the US post-election year also suggests a cyclical low point at the end of January. From then on, the gold price may begin to end the current consolidation.

Gold (daily)

Chart gold

Source: macrobond, HSBC²

“False breaks are followed by fast moves”

After the seasonal considerations, we now want to do a relative one, because the ratio chart between the gold and silver prices made a remarkable “U-turn” in 2020. But first in the spring there were new historical highs beyond the 110 mark, i.e. H. Investors had to spend more than 110 ounces of silver to purchase 1 ounce of gold. Ultimately, this development turned out to be the final overshoot of the upward trend channel that had existed since 2012 (see chart). A classic “false break” was followed by a break in the corresponding upward trend of the last eight years. A long phase of gold outperformance to its “little brother” should have come to an end. On the timeline, the silver comeback should last longer than just six months. Rather, the recent pullback to the key chart area of ​​the past 35 years offers around 80 investors the opportunity to consider new silver investments. In the historical context, it is still an attractive relative entry level, especially since it tends to be easier for the silver price to beat the gold price in a general precious metal house phase (continued on Monday).

Gold / Silver Ratio (Monthly)

Chart gold / silver ratio

Source: Refinitiv, tradesignal²

5-year gold / silver ratio

Chart gold / silver ratio

Source: Refinitiv, tradesignal²

Are you interested in a daily delivery of our newsletter?

Subscribe for free

Important instructions
Advertising notice

HSBC Trinkaus & Burkhardt AG
Derivatives Public Distribution
Königsallee 21-23
40212 Düsseldorf

Free info line: 0800/4000 910
From abroad: 00800/4000 9100 (free of charge)
Hotline for consultants: 0211 / 910-4722
Fax: 0211 / 910-91936
Homepage: www.hsbc-zertifikate.de
Email: certificates@hsbc.de

2)Transaction costs and your custody account price (if any) are not taken into account in the presentation and have a negative effect on the performance of the investment.

Tags

Related Articles

Back to top button
Close
Close