XAU/USD: Gold Slides 5% as Volatility Wanes – Will Support Hold?

Posted 15 January, 2020

Spot gold (XAU / USD) has fallen about 5% from its high above the $ 1,600 mark last week. Although gold prices have been under pressure recently, this product has remained around 1% higher since the start of the year.

However, gold may soon begin to march again with technical support levels just below the XAU / USD spot, which could keep the price of gold down.

 

XAU/USD – SPOT GOLD PRICE CHART: DAILY TIME FRAME (AUGUST 2019 TO JANUARY 2020)

Gold Chart XAU Price Forecast

Chart created by @RichDvorakFX with TradingView

 

Gold daily chart from 2019 August. Pay attention to the recent peak of gold based on the 4-month bull flag consolidation model that I expected and noted in my previous gold forecast.

As the XAU / USD overshadowed its line of resistance, continuing through some of its lowest highs since 2019. From September to December, during the 9 trading days, gold rose nearly 10% to its daily average of $ 1,611.34 in 2020. January 8th.

The price of gold currently fluctuates around the mark of $ 1,455, since November 12, rebounding about 38.2% of the trading range. The lowest day recorded by XAU / USD. The precious metal is currently seeking technical assistance to avoid lowering local gold prices.

Thus, the technical levels of the mergers, marked at $ 1,535 and $ 1,515, indicate potential areas of resistance that gold prices may support. While the image of a falling wedge, which is apparently only in its infancy, may indicate a positive technical change in the bull's gold outlook, the 9-day exponential moving average may maintain XAU / USD in the short term.

GOLD VOLATILITY – SPOT GOLD & GVZ INDEX PRICE CHART: DAILY TIME FRAME (MAY 2019 TO JANUARY 2020)

Chart of Gold Volatility XAU Forecast

Chart created by @RichDvorakFX with TradingView

 

The start of an immediate change in gold prices in the new year was mainly in response to the renewed demand for safe havens, caused by increased geopolitical risks from the Middle East amid tensions between the US and Iran.

Since then, the price of gold has fallen following Trump's speech, which says there is no appetite to continue the military escalation between the two countries. Accordingly, volatility indicators such as the Cboe Gold Volatility Index (GVZ) have declined along with market risk and uncertainty.

Given the overall strong positive correlation between spot gold and gold volatility, XAU / USD may continue to be under pressure until another important catalyst spurs demand for anti-crisis assets such as gold.

 

STOCK MARKET VOLATILITY – S&P 500 TO GOLD RATIO & VIX INDEX PRICE CHART: DAILY TIME FRAME (MAY 2019 TO JANUARY 2020)

Spot Gold Price Chart Ratio to the S&P 500 Index Overlaid with VIX

Chart created by @RichDvorakFX with TradingView

 

Meanwhile, the VIX Index, a favorite barometer of perceived risk or uncertainty, often cited by traders and investors, is approaching 12:00 p.m. And it talks about increasing market satisfaction, with US stock indices recording record highs almost every day. Since 1990 The VIX index's historical average was 19.14 with a median of 17.23.

Accordingly, we can soon see a “significant shift” and the redistribution of risk from stocks to safe haven assets such as gold. The concept is illustrated in the above chart with the S & P 500 index to identify gold that is starting to look very heavy. Sudden volatility can cause traders to run out of stock and be indebted to gold.

Next forecast

02 September, 2019 16:36

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US dollar breaks to peaks
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