The Great Gold Trap
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Precious metals and especially gold have found itself in a difficult position both fundamentally and technically. The yellow metal over the second week of May has been benefiting from a stalling trade agreement between the U.S. and China therefore derailing the rally in equities and sparking safe haven buying in treasuries and gold. Depending on how long this lingers, gold could be trapped between the 100 and 200 day moving averages while trying to hold a double bottom. There’s an old saying that double tops and double bottoms generally hold, while triple tops and bottoms rarely hold.
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Daily Gold Chart and Price Outlook
Looking at the chart above, the double bottom I am focusing in on are the lows on April 23rd at $1267.90 and May 2nd at $1267.30. This also coincides with the 200-day moving average at $1268.10. If we see a resolution to the trade agreement and a sharp rally in equities this could pressure these levels. Looking at protection if someone was bullish they might consider June put options as insurance however on the upside gold has another set of challenges, so a rally might not be as strong as one would expect. The 100-day moving average comes in at $1302.40 and if a trade agreement gets approved we might hear interest rate discussions back on the table.
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