Gold is limited to annual correction! What to expect?!

The year 2018 is finishing and in fact this year has a little more than a month left. So it’s time to start base an expectations for the end of the current year for gold.

The entire dynamics of gold in 2018 can be described as downward, despite the fact that gold actually declined from April to mid-August. The rest of the time the quotes for gold were traded either in flat or in correction phase.

Conventionally, the dynamics of gold in 2018 can be divided into three phases: flat, decline and correction.

Flat

Starting from January through mid-April, gold was trading in a wide lateral range, limited to a channel from 1300 to 1365-70, which actually corresponded to the formation of a reversal after the growth of gold throughout 2017.

Decline

Starting from May to mid-August, gold showed a decline, and in a very narrow downtrend, which was caused by the strengthening of the US currency in this period and the increase in the  US government bonds yield, which were more profitable assets than gold.

The interactive chart shows the dynamics of gold against the US dollar (Japanese candlesticks), the US dollar index (blue line) and the 10-year US state bonds yield (red line).

On the chart you can see that in August, the US dollar index and the US state bonds were traded in different directions. As a result, gold got a chance for correction and moved in a side trend the whole September.

Correction

From September until the writing of the article (mid-November) gold remains in the correction phase. To a greater extent, it is due to the reduction of risks and the return of investors to gold.

Expectations for gold 

In the context of maintaining a moderate optimism in the market and the strengthening of the dollar, we can expect further correction of gold. Gold will be traded in a well-established trading range. The main resistance is located at levels: 1210.00, 1240.00, 1260.00 and 1290.00. The support is the marks: 1195.00 and 1180.00, from which a rebound is worth expecting .

An alternative development of gold and a less likely scenario could be a decline in the consolidation of gold below 1190-80.00, which would indicate a return to decline and open the way to support levels: 1165.00 and 1140.00. In this case, this scenario will take much more time.

Anton Hanzenko