Gold storm in a safe harbor

Introduction

Now came so much prolonged moment of spring moods on the markets. On the one hand, it pushes traders to unreasonable decisions, and on the other, it leads to a reevaluation of assets and produces a view about drivers of growth and principal risks of this year. The asset that сame across our radar is quite a new one, and until recently it was usually considered by the majority of investors as the main one in their portfolios. Today we are going to talk about XAU/USD (Gold).

Basic arguments

XAU/USD (Gold) is considered as one of the main safeguard assets when the US Dollar perspectives are unclear, and other global influencers are busy with their own stuff. We can say for sure that at the beginning of this year, risks with respect to the dollar, the pound and the euro were quite significant. The US political system was in troubles, and attacks by the opponents to the US President continue to rain down to the dollar creating additional pressure. Europe continues splitting apart at the seams, because of the Brexit, so the influence from the EU is getting lower and lower. They definitely will need higher output, but unfortunately, that is quite hard to demonstrate now.

Picture 1. A price chart of XAU/USD for 01.01.2019 - 23.04.2019.

For the majority of investors, the current global situation looks like a ninth wave flushing to a small boat in the ocean. It means that it is time for XAU/USD to come like a superman, protect against bad guys and bring silence and calm into the city. We could see this as a great recovery from 01.01.2019 till 20.02.2019 on picture 1.

However, when the dust settled, a superman was no longer needed. He became a relic of the past and should stay on the bottom, rarely trying to get off the ground during corrections on the closing of short positions and traders' profit fixation. It became clearly visible on picture 1 right after 20.02.2019 when it became obvious that fundamental fears will remain just scary bedtime stories.

Technical arguments

Picture 2. A price chart for the period of 23.03.2019 - 23.04.2019.

Picture 2 clearly indicates a downward trend with weak corrections and the transparency that worth to be in technical analysis textbooks.

However a trend have been remaining the same for quite a long time, and there is concern regarding near-term growth, which may come out of a sudden and ruthlessly throw even experienced traders on the rocks. Anyway, at this moment I suggest you not to fear the growth but to count on a near-term falling. The reason for this is an aggregate position of big traders for this asset.

Analysis of big traders

The current position of big traders remains bearish and directed downwards. Despite significant positions reductions, the market is not overheated yet because of them and has some space for further falling.

Picture 3. A price chart of XAU/USD and a chart of big traders for 23.03.2019 - 23.04.2019.

As we can see in picture 3, the index of positions of big traders at this moment remains close to the middle level, which indicates that there is still a reserve of 20-30 percent point of the index for possible falling.

Also, on the next week, we expect a significant reconsideration of positions, which may lead to considerable price fluctuations.

Forecast from our team

At this moment, for the period of 29.04.2019 - 05.05.2019, we forecast that the price of XAU/USD will go down.

For more confident profits and position control we recommend you to use such indicators as RSI, SMA and Bollinger Bands (Lines) and keep the ratio of 2 trades "down" and 1 trade "up".