After reaching all-time highs above the $2,000 early in the month, the gold price fell $200. The correction, seen by many as a healthy one, proved to be just an opportunity to go long again. But on its way down, gold failed to retest a broken triangle’s trendline. Moreover, it should meet the apex before more advance is possible. Hence, bearish interest around $2,000 is only normal.
Gold as an Anti-Dollar Asset
The USD’s dilution is the root of all price action in gold. The XAUUSD pair extended its rally the more the USD declined across the FX dashboard. It is not only the gold price that reflects the USD’s weakness, but everywhere you look, there is the same sentiment – the stock market, the G10 currencies, etc.
What is interesting is that the gold price ascending move started way before the coronavirus economic crisis. More precisely, it began last year, in the summer of 2019.
Next, by the time the Fed signaled the end of the tightening cycle, the gold price put another leg higher. Moving forward, the Fed eased as the coronavirus outbreak reached the Western world – the gold price exploded higher fueled by the Fed and the U.S. Congress flooding the markets with cheap dollars.
Gold Price Technical Analysis
The recent price action seen in the XAUUSD market is not for everyone. The break higher above the $2,000 was quickly followed by a pullback and then a spike back to the round number.
The round number (i.e., $2,000) is likely to keep attracting the price action for a while. Even if the USD takes another hit on the FX market, the price of gold is unlikely to follow for a simple reason – it led the decline in the USD for several months before it started.
Going short at $2,000 needs a stop-loss order at $2,100 for the move to the apex to make sense from a risk-reward ratio perspective. Keep in mind that this is a riskier trade than usual, as picking tops or bottoms effectively needs a contrarian view.
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