🎈 Up Big Today: Find today's biggest gainers with our free screenerTry Stock Screener

Chart Of The Day: Is Gold Ready For Another Rally?

Published 06/07/2021, 09:32 AM
XAU/USD
-
GC
-

In an interview on Sunday night, Treasury Secretary (and former Chair of the Federal Reserve) Janet Yellen said that higher interest rates would be positive for US policy makers and the country. She said:

“If we ended up with a slightly higher interest-rate environment it would actually be a plus for society’s point of view and the Fed’s point of view.” 

But let’s back up. It isn’t the Treasury Secretary’s point that raising interest rates would benefit the economic recovery after perhaps its worst disruption in history. Rather it appears to us that she is trying to fulfill her true purpose: promoting her president’s agenda. And she has done this by arguing that President Joseph Biden’s $4 trillion spending proposal would be positive for the economy, even if it leads to a hike in interest rates.

Whenever we see a 'whether or not' comment like Yellen's we tend to pay extra attention. We consider it a somewhat defensive posture. Case in point, the Fed doesn’t seem to be on the same page when it comes to higher interest rates.

So far, there is little market reaction to what is a dramatic statement. This apparent confusion between the Fed and the Treasury—and a former Fed Chair, no less—could be the stuff that creates market swings. Any expectation of a rate hike will likely drive the dollar higher and thus weigh on commodities.

Gold is slightly lower following the comment, but it may just be a buying dip.

Gold Daily

Gold had started to slide last Thursday. We have been waiting since mid-May for a return move after the yellow metal broke out of the falling channel since the 2020 record peak, as well as the 200 DMA. While the MACD’s short MA crossed below the long MA, providing a sell cross, the RSI bounced above its rising channel since the March low, just as the price did.

For as long as the price is above the falling channel, and certainly while it is within its rising channel, we are going to remain bullish.

Trading Strategies

Conservative traders should wait for a new record high, so that the medium term price, which is still down, would work in tandem with the rising long-term trend.

Moderate traders would risk a long trade, if the price allows an entry point with small exposure, as close as possible to the bottom of the rising channel, considering that the June 1 high of $1,919.20 provides a resistance, and the risk-reward ratio has to make sense.

Aggressive traders could go long at will, provided it is in accordance with a coherent trade plan that they stick to. Here’s an example:

Trade Sample

  • Entry: $1,870
  • Stop-Loss: $1,850
  • Risk: $20
  • Target: $1,930
  • Reward: $60
  • Risk:Reward Ratio: 1:3

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.