Gold. Expectations for February and March 2019.

In December 2018 and early 2019, gold showed a significant growth, which can be explained by a number of factors. One of the main drivers of strengthening gold at the change of the year was the investors’ flight from risks and they bought gold during the Christmas and New Year holidays. Geopolitical risks that hang over financial markets for a long time continued to be a more significant factor. Also it is worth noting the fact that many countries are dissatisfied with Trump’s policies and reject the US dollar partly or completely. As a result, gold became the reserve currency in most cases. At the same time, virtually all of these factors together caused the upward dynamics of gold in December 2018 and January 2019.

Current situation and expectations for gold

After freezing a number of Venezuelan shields with gold on the exacerbation of the political situation in Venezuela the situation with gold was normalized partially, which was also facilitated by market saturation. In fact, this was the reason for the correction of gold in the early February. So far, gold has been adjusted after rapid growth in late January.

Gold began to form an “inverted head and shoulders” pattern, which would indicate a resumption of growthafter completion of the formation, but, in turn, it can be limited to existing extremes and a number of geopolitical factors.

In the longer term, gold is limited by the bearish divergence of the MACD indicator and overbought on the weekly timeframe.

Figure XAU/USD D1. Current price – 1313.00

It may cause a full-scale decline in the value of gold against the growth that has been observed since August 2018 in the face of declining demand for safe assets or even a simple correction.

In this case, with the February low of 1302.00, we can expect a more significant correction to the support levels: 1290-85.00 and 1270-65.00. Significant resistance is located at levels: 1310-20.00 and 1330-40.00.

Alternative expectations for purchase

In the conditions of further aggravation of geopolitical risks, which may be the new trade duties of the United States and China, we can expect complete disregard of the technical picture and the preservation of the upward trend in gold as a safe haven asset. This will open the way to the highs of the beginning of 2018 at the levels: 1345.00 and 1360.00.

Despite the fact that gold has significantly reduced the status of a safe asset in the past decade, this status can quickly resume in the context of geopolitical risks and aggravating conflicts.

Anton Hanzenko