đGold 2020 year review - Here's where it's going nextđ
Gold has had one hell of a year â right now I am seeing bearish divergence signalling a big correction which Iâll talk about below.
My chart starts off in December 2019 when fears of a rescission hit the papers, the bond market was falling apart, add on top US/China and US/Iran tensions, gold went on a run.
RSI reached 86 in January 2020, and while the price of gold kept rallying once the world knew about COVID-19, momentum could not surpass the January high of 86.
This bearish divergence played out in March 2020 in the panic sell off (this same bearish divergence was also in many stock markets including NASDAQ, S&P, FTSE100 etc).
I now see another panic sell off coming in the next few weeks/months as this repeats itself.
Gold is a safe-haven in times of uncertainty, so why did it fall in March?
In the short run, the market is a voting machine but in the long run, it is a weighing machine.
When markets panic, they throw the baby out with the bath water that means selling their stocks along with the gold (which they probably bought for such moments). Traders who had margin calls also needed to sell their gold to cover losses, adding to the drop.
In March the markets were in FEAR, fastward to July we are nearing max GREED.
Gold quickly found a floor and rallied after the FED said âthey will do whatever it takesâ.
This message was echoed by other central banks and took gold to the $1,680-$1,750 area, along with the dollar weakening after peaking in March.
Here gold made a new base as the markets were figuring out whether we are going to get a V-shape recovery or not (base in the white background in my chart).
Prices then broke upwards of $1,750 is trading at a 8 year high at $1,818, singling to me that markets expect more bad news in the short/medium term.
Where is gold heading next?
One thing that worries me about this rally is that we are seeing a bearish divergence on multiple gold time frames, as pointed out in bearish divergence #1, the last time this happened gold fell by 15%.
In the short-term (weeks/months) gold can push higher and test or break the all-time high of $1,920, but the higher it goes in the short-term, the more brutal the correction will be when it comes.
The NASADQ and tech stocks are all out of control and appear to be in their final leg: the mania phase.
During this mania, gold will move higher as well, but when the stocks pop, it will take gold down with it, like we saw in March.
There is now even more retail buyers in the market, that is usually a good sign the mania is coming to an end, and it will do in spectacular fashion. Google "India retail buyers, South Korea retail traders, Thailand retail traders, US/UK retail traders" and you'll see this mania is global.
I am very bullish on gold long-term, but in the short-term (weeks/months) I see a correction coming because of the bearish divergence on multiple time-frames, everyone from gold bugs to banks to main-stream media sites calling for $2,000 gold.
There is also a bearish divergence on the NASDAQ, S&P, silver and many more charts â signalling we are near the end of this mania.
Gold is going to get a shake out before moving to all-time highs, the question is how big of a correction? The higher we go, the higher we fall.
I will look to be adding long positions around the $1680 level and lower if we get there. I will not be looking to short gold because the price can move up a lot higher from here.
Please remember that these situations can take weeks or months to play out and don't happen over night.
Do you have a question? Feel free to leave them below. If you enjoyed this TA please give me a follow on Trading View as I chart most major markets in the same way.
My chart starts off in December 2019 when fears of a rescission hit the papers, the bond market was falling apart, add on top US/China and US/Iran tensions, gold went on a run.
RSI reached 86 in January 2020, and while the price of gold kept rallying once the world knew about COVID-19, momentum could not surpass the January high of 86.
This bearish divergence played out in March 2020 in the panic sell off (this same bearish divergence was also in many stock markets including NASDAQ, S&P, FTSE100 etc).
I now see another panic sell off coming in the next few weeks/months as this repeats itself.
Gold is a safe-haven in times of uncertainty, so why did it fall in March?
In the short run, the market is a voting machine but in the long run, it is a weighing machine.
When markets panic, they throw the baby out with the bath water that means selling their stocks along with the gold (which they probably bought for such moments). Traders who had margin calls also needed to sell their gold to cover losses, adding to the drop.
In March the markets were in FEAR, fastward to July we are nearing max GREED.
Gold quickly found a floor and rallied after the FED said âthey will do whatever it takesâ.
This message was echoed by other central banks and took gold to the $1,680-$1,750 area, along with the dollar weakening after peaking in March.
Here gold made a new base as the markets were figuring out whether we are going to get a V-shape recovery or not (base in the white background in my chart).
Prices then broke upwards of $1,750 is trading at a 8 year high at $1,818, singling to me that markets expect more bad news in the short/medium term.
Where is gold heading next?
One thing that worries me about this rally is that we are seeing a bearish divergence on multiple gold time frames, as pointed out in bearish divergence #1, the last time this happened gold fell by 15%.
In the short-term (weeks/months) gold can push higher and test or break the all-time high of $1,920, but the higher it goes in the short-term, the more brutal the correction will be when it comes.
The NASADQ and tech stocks are all out of control and appear to be in their final leg: the mania phase.
During this mania, gold will move higher as well, but when the stocks pop, it will take gold down with it, like we saw in March.
There is now even more retail buyers in the market, that is usually a good sign the mania is coming to an end, and it will do in spectacular fashion. Google "India retail buyers, South Korea retail traders, Thailand retail traders, US/UK retail traders" and you'll see this mania is global.
I am very bullish on gold long-term, but in the short-term (weeks/months) I see a correction coming because of the bearish divergence on multiple time-frames, everyone from gold bugs to banks to main-stream media sites calling for $2,000 gold.
There is also a bearish divergence on the NASDAQ, S&P, silver and many more charts â signalling we are near the end of this mania.
Gold is going to get a shake out before moving to all-time highs, the question is how big of a correction? The higher we go, the higher we fall.
I will look to be adding long positions around the $1680 level and lower if we get there. I will not be looking to short gold because the price can move up a lot higher from here.
Please remember that these situations can take weeks or months to play out and don't happen over night.
Do you have a question? Feel free to leave them below. If you enjoyed this TA please give me a follow on Trading View as I chart most major markets in the same way.