Gold (XAUUSD) Price Prediction for May 2020 | FOREX RECOMMENDATION
The below gold price forecast article is a part of the May 1, 2020 Gold & Silver Trading Alert that we sent to our paid subscribers. Enjoy:
Practically everything that we wrote on Monday, and yesterday. remains up-to-date today. In fact, yesterday’s decline, the volume that accompanied, and the gold-USD link all further confirm the forecast that current situation in gold, silver, and mining stocks is similar to what happened in the first half of March. Let’s take a look at the details.
Starting with a quote from our previous analysis to provide context:
In short, the USD Index is after a huge rally and a correction. In late March, the USD Index corrected the previous rally in terms of price moves, but not in terms of time. The latter is what it seems to have been doing for the past month. The USD Index did move higher in April, but the moves were relatively boring – somewhat similar to how it rallied in January and February. And what did gold do at that time? It moved higher, and then declined at some point once it got too high too fast – practically regardless of what the USD Index was doing. That was in the final part of February.
Please check what silver did in January and February. It moved mostly higher, only to decline in the final part of the month. Overall the initial action was positive but rather nothing to call home about. Gold’s rebound in early March was accompanied by rather weak action in silver.
What’s happening now? Gold declined in mid-April, similar to how it declined in late February. The USD Index initially triggered the move, but then gold declined for a few days regardless of what the USDX was doing. And the rebound that we saw last week? Silver’s upswing was nothing to call home about – just like what we saw in early March.
Back in March, gold’s rally ended after the first clear intraday decline. Interestingly, the very first day of gold’s March slide – March 9th - took place when the USD Index also declined. That daily decline, however, was actually the start of a powerful rally.
That USD Index rally was not only powerful, but it was also volatile. It was volatile not only in general, but also in terms of each individual trading day.
Guess what – Friday was the day when gold clearly declined on an intraday basis, and that was also when the USD Index declined a bit. Silver hasn’t done much.
What is even more interesting is that today, gold is also declining (about $10 at the moment of writing these words) along with the decline in the USD Index (about 0.26 decline at the moment of writing these words).
Just like it wasn’t clear that gold was topping in the first half of March, it’s far from being clear now – at least for most market participants.
Neither we would bet the farm on the scenario in which gold topped on Thursday, but it does seem quite likely.
Once again (and we are writing it for the fourth day in a row), gold futures ended the day lower and so did the USD Index, confirming the indications from the previous day.
In a way, the indications are now more bearish than they were in March, because back then gold futures declined with the USD Index for just one day, and right now we’ve seen this kind of performance for 5 days now.
In other words, this week’s price action is similar to what happened around March 9th – at least in case of the gold-USD link.
At this point you might be wondering if maybe something major changed in the USDX-gold dynamics, and gold is now moving along with the USD Index. This would imply that a move higher in the USD Index would likely result in higher gold prices. But looking at the link more closely doesn’t confirm this. Let’s take a look at yesterday’s intraday performance of GLD and UUP – the ETFs representing gold and USD Index.
The two first rectangles are most important. The grey rectangle shows that gold ignored USD’s decline, and it declined only after it bottomed and started to move back up. Gold then multiplied USD’s relatively small strength and declined profoundly.
Even though it might seem like gold is moving in the same way as the USD Index is, it’s not the case, and the implications are really clearly bearish.
The last three rectangles show that in general, gold is still moving in the opposite direction to the USD Index. The green rectangles mark times when gold moved up while the USDX declined, and the red rectangles mark times when gold moved down while the USDX moved up.
There’s also one other key thing that we would like you to focus on – it’s the white space between the colored rectangles. That’s when gold reversed for the day. It’s very important to note how it reversed. As it’s usually the case, the context is the king. The thing is that gold reversed while the USD Index was still rallying. It was relatively close to USD’s top, but notably ahead of it. Does this make you recall something?
It might, because that’s exactly what we saw in 2008 at gold’s final bottom.
Please focus on the two long rectangles – the green one, and the red one.
Gold started its final slide, when it declined despite the back-and-forth movement in the USD Index. That’s exactly what is happening right now.
Most interestingly – with regard to yesterday’s GLD-UUP link – in 2008, gold bottomed, when it reversed while the USD Index was still rallying.
In fact, that’s what we described as the key confirmation that we want to see before saying that the outlook became bullish.
What just happened is that we saw a confirmation that gold continues to behave in this way also in 2020! The perspective is different (daily vs. intraday), but the key message remains the same: gold continues to form major reversals once it proves to be able to withstand the bearish pressure from the USD Index. This is despite the fact that more than a decade passed since 2008 and quite a lot of changed in the meantime. There’s more debt in the world, the interest rates are different, the geopolitical situation is different, there’s a pandemic right now, and even one’s grandchildren wear bigger shoes. And gold still reacts in the same way.
The above increases the odds that this particular signal will be correct in estimating the exact moment when gold bottoms in the following weeks, and that’s a very good piece of news.
Summing up, the fundamental situation for gold is excellent as it seems we are going to enter stagflation, it seems that gold won’t soar, before plunging first. It seems that the final big move lower is already underway.
Our last week Predicted trade: Sell gold from 1708 sl 1723 first target 1690 second target 1680 third target 1660.
Do you want to know insides, best entry prices to short or buy now Contact me on Telegram: https://t.me/forexpersonalguider
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