Last Friday, gold price rose to $1517 per ounce and then fell sharply，forming an annoying bearish signal of shooting star at the end of the day. Many investors who are bullish on gold, at this moment, may become less firm, while those who are bearish will be thrilled. Of course, I still insist on the bullish view of gold firmly. The fundamentals of bullishness have been stated many times in past articles, thus I will share with you why I'm still firmly bullish on gold by purely technical analysis.
The above two daily K-line charts are the K-line chart of the US-Japan currency pair and gold in the previous article. From these two figures, we can see that the trend of gold and the yen has shown an absolute co-directional relationship in the larger time frame (inverse relationship with the US and Japanese currency pairs). As for the reason, they have been analyzed in the previous article and will not be repeated here. As a matter of fact, gold and the yen have started this almost similar trend since June 2007, and you can take a closer look at the k-charts between the two since then if interested. First of all, as far as the current situation is concerned, there is no doubt that gold and the yen are still in the upward trend of the weekly level. The yen has rebounded to near the red pressure line I drew in the picture (originally a triangular support line, which became a pressure line after falling below this May). The red pressure line and the blue pressure line are the two trend lines of the classic triangular head shape formed by the US-Japan currency pair from May 2015 to this year. After falling below on May 31 this year, the red pressure line has passed repeated rebound tests till August 1, which seems to be possibly tested again. Based on past experience, however, the US-Japanese currency pair has already completed this round of rebound test, thus the price is unlikely to touch the key resistance in a round of rebound in the weekly trend, that is to say, the US-Japan currency pair should continue the declining trend at weekly level for some time to come.
According to the co-trend relationship between gold and yen for more than a decade, as well as the future trend of yen to push down the trend of gold, we can conclude that gold should continue its upward trend starting from August 2018 for a while. In fact, enjoying stronger safe-haven nature than that of the yen, gold has started a rally ahead of the yen since hitting a low of $1,459/oz on October 1st. Ok, let's do some analysis and prediction by the technical trend of gold itself. The following picture shows the daily K-line chart of gold from August 2018 to the present:
Started at $1557 / oz on Sept. 4, the medium-term correction of gold just hit the first wave at the golden section $1.618% with an absolute price of $1,461 / oz. Last week, gold has broken through the key resistance $1,503 / oz to $1,517 / oz of this round of downward pressure line. The short-term correction of gold from $1517/oz can be seen as a pullback test after breaking through key resistance. As for the shooting star daily K- line formed last Friday, I have explained in the past articles that the so-called bearish signals such as shooting star, twilight star, etc. are invalid in a big round of rising trend, and only when the gold price rises to the real critical price level should we be alert. Finally, let's make a bold prediction about the gold price target of this round. Since the mid-term correction of gold from September 4 has been supported by the 1.618% golden division when touching the first wave, and started a new round of rising, thus theoretically, it is possible for gold to test the 2.618% level of the first wave at an absolute price of $1,648/oz. Meanwhile, however, it's important for us to understand why the gold price didn't pull back until September 4, when it hit $1,557/oz. Let’s pay attention to the weekly k-line of gold on February 17, 2013, when the price hit a low point of $1,555/oz (which happens to be the intraday high for gold on August 26 this year). After getting short-term support at this price, it took nearly two months for the gold price to recover. In the week of April 7, 2013, it fell sharply below $1500 / oz integer point and entered a long bear market lasting more than two years. In this relay configuration of the Bulls and Bears conversion, the upper limit is $1,620/oz and the second highest is $1,616/oz.
To further speculate the target of this round of gold, I made a calculation by a special golden section method, the result of which is exactly $1616/oz. Although my special method has been verified in the past prediction, I am not sure if it will still work this time. Leave further verification of the actual trend of the market. We will wait and see!
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