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Chart Of The Day: Rising Interest Rates Means Falling Gold

By Investing.com (Pinchas Cohen/Investing.com)CommoditiesApr 01, 2021 09:32AM ET
www.investing.com/analysis/chart-of-the-day-rising-interest-rates-means-falling-gold-200570742
Chart Of The Day: Rising Interest Rates Means Falling Gold
By Investing.com (Pinchas Cohen/Investing.com)   |  Apr 01, 2021 09:32AM ET
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The outlook for gold is not promising. Expectations for higher interests rates makes the yellow metal less attractive.

The Fundamentals

Rising yields come about with expectations for rising rates, amid the economic recovery and rising inflation. Given that gold does not produce a yield—unlike the dollar via interest rates—rising rates favor the USD, at the expense of gold. Also, a rising greenback makes the yellow metal, which is priced in dollars, more expensive, hitting demand, which hurts gold even more so.

After hitting a new all-time high last year, gold has fallen back to its pre-coronavirus levels which is telling. Investors think the virus and lockdowns are behind them. They expect that COVID-19 vaccines will allow the economy to reopen and pick-up where it left off before the coronavirus outbreak, boosted by unprecedented infrastructure spending.

The Technicals

Gold has completed a rising flag—a price move which speculators believe shows a rebound is underway, but which turns out to be a short-lived short-cover bounce before another leg down.

Gold Daily
Gold Daily

The flag fits precisely within a falling channel since the January high—mirroring the dollar bottom—and the flag’s conclusion signals the new, steeper channel will break through the bottom of the more tempered, broader falling channel since the August record.

Caution

With a resurgence of the coronavirus, renewed lockdowns and extended social restrictions around the world, and with challenges to President Joseph Biden’s ambitious infrastructure plan, the fickle market can flip the risk switch. 

From a technical perspective the price may find support by the bottom of the original falling channel, which in turn may find support by an uptrend line since the May 2019 low (seen in the thick, black line peeking from the bottom of the chart). 

Finally, note, the RSI may be producing a H&S bottom for momentum. 

A climb back over the $1,760 level will complete a double bottom that catapults the price back toward the top of the broader channel, as it breaks through the sharper channel.

Therefore, proceed with caution. In trading, nothing is ever in the bag. Employ money management, such as the following:

Trading Strategies

Conservative traders should wait for the price to break through the long-term (thick, black) uptrend line since the May 2019 bottom, then for a return-move that finds resistance, before committing to a short position.

Moderate traders would short after the same crossing below the long-term uptrend line, and for better entry for a rebound, if not for confirmation.

Aggressive traders could short at will, having accepted the higher risk that goes with moving ahead of the rest of the market, for a better seat. Risk management is essential. Here’s an example:

Trade Sample

  • Entry: $1,720
  • SL: $1,760
  • Risk: $40
  • Target: $1,600
  • Reward: $120
  • Risk-Reward Ratio: 1:3

Author's Note: This is just a sample. If you haven’t read and understood the actual analysis and inherent risks, do NOT trade. Even if our analysis is correct—and it may not be—if you read the article you’d know the market can flip, as we described, or in any other unforeseen way. Even if the analysis is correct, the sample may not be. Even if the sample is correct, it may not work for you, based on your personal budget, timing and temperament. If it isn’t clear by now, trading is a complex undertaking, and if you’re looking for fast, easy money, trading is not the answer. All we can offer you is this: take small risks, until you gain the experience to know how to customize your trading plan and gain the wisdom to understand that—like anything else—trading requires patience, skill and experience to hope to make consistent returns. If you approach these traders with the will to learn, you may make money someday. If you are here for the big buck and fast, you never will.

Chart Of The Day: Rising Interest Rates Means Falling Gold
 

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Chart Of The Day: Rising Interest Rates Means Falling Gold

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Comments (16)
Aymeric Barou
Aymeric Barou Apr 03, 2021 6:34AM ET
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I think Biden policy is bad for gold prices on the short term, but also very good from a long term perspective as all these debts mean low interest rates forever. All the negative comments on this article make me think that gold prices have not bottomed yet.
Greg Potter
Greg Potter Apr 02, 2021 3:02AM ET
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I understood the key factor was REAL interest rates. I guess I'm looking at a longer term view, but if inflation takes off & given the Fed, BOE etc will be loathe to see interest rates increase, (in fact they want more inflation, and it is a stealth tax on savers that reduces the value of their colossal debts) then real interest rates may well turn negative, historically that has been good for gold.
Amie Inconnue
Amie Inconnue Apr 02, 2021 3:02AM ET
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Finally, a comment that is about fundamentals, not emotions! I agree about the real interest rates. That, and the ever-changing everything, will switch the trend at some point. My conclusion based on the article is: to wait for a better entry point for GLD, keep listening to the analysis that Pinchas is doing as the data changes, and learn how to do that.
Terence Williams
Terence Williams Apr 01, 2021 10:55PM ET
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None of us know the answers to gold future prices. The author, all of us.
warren bullshiatt
warren bullshiatt Apr 01, 2021 6:50PM ET
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bear tard short stuck in ugly trades atm writing articles to scare people, get a real job.
Ominous Owl
Ominous Owl Apr 01, 2021 6:50PM ET
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Exactly what I thought!
Doug Wildman
Doug Wildman Apr 01, 2021 6:33PM ET
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I love the comments and love that Cohen responds to them. Do you have a coin? Flip it for the best results.
Pinchas Cohen
Pinchas Cohen Apr 01, 2021 6:33PM ET
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I've posted over 1,700 articles in the last four years. You're welcome to see for yuurself.
CHAD TENDIES
CHAD TENDIES Apr 01, 2021 6:26PM ET
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Pinchas is a shill for the big banks don’t listen to this. Buy gold NOW.
Pinchas Cohen
Pinchas Cohen Apr 01, 2021 6:26PM ET
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Thanks for thinking so highly of me.
SHORT GOLD
SHORT GOLD Apr 01, 2021 5:58PM ET
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Price action last 2 sessions was end of month/quarter rebalancing and shorts covering before a 3-day long weekend. Plus we rolled over this week from April being the front to June. Next 2 weeks are going to going to see gold in the low 1600s/upper 1500s.
TI Wil
TI Wil Apr 01, 2021 4:30PM ET
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Lame gold is life
MK MK
MK MK Apr 01, 2021 3:21PM ET
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US bustards would wish that. Sell USD, buy Gold
Pinchas Cohen
Pinchas Cohen Apr 01, 2021 3:21PM ET
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It's your funeral.
Murali Brahmandam
Murali Brahmandam Apr 01, 2021 12:57PM ET
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wrong title: Risen rates meant fallen Gold. is the correct title. from here: Falling rates mean rising gold. gold luck
Pinchas Cohen
Pinchas Cohen Apr 01, 2021 12:57PM ET
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I have no idea what you're saying.
Robert Flores
Robert Flores Apr 01, 2021 12:25PM ET
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But interest rste is falling- this article and short entry would have had even some relevance last week, and even more a month ago
Pinchas Cohen
Pinchas Cohen Apr 01, 2021 12:25PM ET
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If you've been reading my articles, I've been short gold consistently since it hit its record.
Amie Inconnue
Amie Inconnue Apr 01, 2021 12:23PM ET
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Pinchas, thank you for the very thoughtful analysis! I guess for stubborn gold-bulls the question is: for how long could gold stay low if it'll fall in the near future? Market is unpredictable, of course, and data keeps changing, but what do you think? Is it more like weeks, months, or years?
Pinchas Cohen
Pinchas Cohen Apr 01, 2021 12:23PM ET
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Hi Amie, you're welcome, and thanks for your kind words. My analysis is looking at weeks.
warren bullshiatt
warren bullshiatt Apr 01, 2021 12:23PM ET
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Pinchas Cohen  your analysis is looking weak lol
Amie Inconnue
Amie Inconnue Apr 01, 2021 12:23PM ET
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Thank you! I'm always waiting for your articles, I think they are brilliant. I wish ppl would actually read the complete analysis, including cautions, and comment about technical analysis and fundamentals, not emotional "right-wrong" staff. Trend doesn't equal prediction, it's just that ppl want a ready answer, and the one that fits their own opinion on top of that!
Pinchas Cohen
Pinchas Cohen Apr 01, 2021 12:23PM ET
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Scott Mears
Tundrascott Apr 01, 2021 12:12PM ET
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Wow.   This ALREADY hasn't aged well.   Any decent TA or cyclist could have told you this statement was impossibly wrong for the last couple of weeks, in fact most of them would have properly nailed the turning day as last Sunday, March 28 2021, including me. Last time I ever even open an article of yours and de facto gift you $0.75 of my eyeballs.   I would never even have opened this article except that the tagline was so ridiculously wrong that I had to read it in case it was only clever click-bait. Anything but clever Have a happy Easter my friend! Scott
Pinchas Cohen
Pinchas Cohen Apr 01, 2021 12:12PM ET
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You didn't understand the article, on a number of levels, and I have no idea what you're saying. At any rate, the trade is very much still in play, and it aged wonderfully.Thanks for your comment though.
Sohanur Rahman
Sohanur Rahman Apr 01, 2021 9:37AM ET
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tnxx all
KN TR
KNTR Apr 01, 2021 7:42AM ET
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Thanks ! MA 100 and this 1675 is the key !
KN TR
KNTR Apr 01, 2021 7:42AM ET
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Weekly MA100 !
Pinchas Cohen
Pinchas Cohen Apr 01, 2021 7:42AM ET
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KN TR  Don't get attached to it.
Ivan Dalion
Ivan Dalion Apr 01, 2021 7:42AM ET
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Pinchas Cohen  You shouldn't get attached to your own, taken out of nowhere, conception and tell people to short gold because you came up with a strange idea that gold will be fallion. Neither technicals, nor fundamentals support your claim. Face the facts and stop trading on hope and fear. Best of luck.
KN TR
KNTR Apr 01, 2021 7:42AM ET
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Pinchas Cohen  Who knows ? Thanks !
Pinchas Cohen
Pinchas Cohen Apr 01, 2021 7:42AM ET
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Ivan Dalion  I find your comment amusing. I provided a full analysis, on both the fundamentals and technicals, and your response is that it's taken out of nowhere, to support my claim, while you provide no analysis whatsoever to support yours, and then you tell me to "face the facts."
Asif Raza
Asif Raza Apr 01, 2021 7:33AM ET
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good
Pinchas Cohen
Pinchas Cohen Apr 01, 2021 7:33AM ET
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Happy trading!
Sohanur Rahman
Sohanur Rahman Apr 01, 2021 7:33AM ET
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Pinchas Cohen
Pinchas Cohen Apr 01, 2021 7:33AM ET
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Sohanur Rahman  You're welcome, Sohanur.
 
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