GOLD Forecast for 2022 and How to Trade it.

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Gold, the precious metal, has been a safe-haven asset for investors for ages now. It is used to hedge against inflation as the value of the USD has been fallen for years now. The inflation figure in the U.S. hits 7%, the highest in 40 years. But the financial world is changing with the invention of digital currencies. Bitcoin, the largest cryptocurrency, has now become an asset as large institutions and investors have considered it as an asset. Even though the volatility in the crypto market is high at the moment, but, as more money gets involved in the market, the less volatile and more stable it becomes. The Government of the G7 nations is still skeptical about the adoption of cryptocurrencies because of the high volume of scam that is attributed to it. But, we all cannot the fact that crypto has come to stay in the financial world and it is going nowhere.

Last year, JP MORGAN reported that investors are liquidating their Gold positions to buy Bitcoin. This means investor are transferring their funds into another asset that will give more returns than Gold. According to the report, investors do not care about the downside as long as it gives more profit. The gold market Cap is currently at $10 Trillion and Bitcoin Market Cap is almost $2 Trillion.

During the pandemic, the FEDs decided to buy Company securities and bonds to help ease the effect of the pandemic on businesses. By doing this, the FEDs cut interest rates to near zero. This made the inflation rate skyrocket, hitting its highest rate of 7% in 40 years. But things changed towards the end of last year when the economy opened fully around the world. The FEDs decided to ease bonds buying by tapering and also to increase the interest rate in 2022.

According to the minutes of the FOMC that was released in the first week of 2022, the FEDs plans to raise interest rate four times this year. Upon the release of this news, the price of stocks, equities, and indices plunged. This will not only affect the stock market but also the Gold market.

The price of Gold has not been trending since mid-last year. It has been trading below 1900 since early June and it has not gone below 1680. I think there is a large liquidation going on. Investors are yet to decide on the best way to invest in Gold as the invention of digital currencies created a new investment opportunity.

The price of Gold is in USD and as FEDs decide to raise interest rates, the price of Gold will likely take a huge hit. Gold is majorly used to hedge against inflation by investors, but inflation is now at an all-time high and FEDs are looking to reduce the effect of inflation by reducing their balance sheet and raising the interest rate.

Albeit, major stocks, and indices are at all-time highs. You can argue that if the price of stocks and indices falls when the FEDs start raising the interest rate, investors might invest in Gold. But, cryptocurrencies are hard to be overlooked as they give more returns than Gold and Silver combined.

These are all fundamental analyses, now let's take a look at the technical analysis.

As seen in the weekly chart below. The price of Gold is in an uptrend since the pandemic year. But the trend has failed to continue in 2021, in fact, price has been in a pullback mode for a whole year. The pullback is taking much longer. No higher highs and lower lows yet. The supply zone at 1900 has not been broken and the demand zone at 1680 has not been breached too. But sellers are getting much stronger and buyers are fading out.

The two V formations drawn with the green line, labelled 1st and 2nd, are both an indication that buyers are getting weak. If you look at the 1st V formation, sellers came in aggressively. Comparing the number of candle that it took the buyers to reach the 1900 supply and the number of candles it took sellers to reject the price, it is obvious that the sellers came in with much force and less candlesticks. It took buyers four weeks to get to rise from 1770 to 1900, but it only took sellers three weeks to erase all the buyers' effort. Price later went on to make to touch 1680 weeks after, but the buyers at 1680 didn't allow price to stay, so they pushed it up aggressively, thereby leaving a long wick on the weekly candle.

The 2nd V formation came after much effort by the buyers to push price back to the recent high. Buyers failed to get to the recent high and the 2nd V formation was formed. This created the first lower high. This is a sign that sellers are taking over, but that doesn't mean the buyers will quit without a fight. This might be the beginning of a new downtrend on Gold and price may fall back to 1500 if the 1680 demand zone is removed.

You can see how aggressive sellers are getting in the daily chart above. I am anticipating a new downtrend on Gold this year and as traders, we need to be ready to take advantage of this wonderful opportunity this year.

The impact of the first rate hike will set the tone for the trend of Gold this year.

The financial market is going to be very interesting this year and I will be watching how it all unfolds.

I will keep you all posted as things unfold on Gold this year. My personal bias is a that Gold will fall really hard this year.

Let me know yours in the comment section.