At the beginning of this trading week, as expected, precious metal prices were unable to escape the sell-off on the financial markets. With a panic low of 2,363 US dollars, the price of gold was briefly traded in a sideways range between 2,300 and 2,400 US dollars. In the meantime, however, prices have already recovered to over 2,428 US dollars.
Gold with tumbler qualities.
Despite the slightly higher highs, the overall situation remains the rather opaque and sometimes turbulent ups and downs that have characterized the gold market since mid-April.
What is impressive, however, is the resilience of the gold price!
Despite the sometimes brutal sell-off attacks, the price of gold always recovers within a few days and persistently pushes itself back up again. These are resilient qualities that should not be underestimated. At the same time, however, the divergences and thus the potential reversal signals continue to increase and are causing a certain amount of skepticism, at least over the next one to three months.
Sell in May and go away, but remember to come back in Self ember
In accordance with the old stock market rule "Sell in May", we have repeatedly called for the summer months to be approached with an increased liquidity ratio in recent months. The foreseeable crash on the financial markets wiped out a market capitalization of 1.3 trillion US dollars in just three days for the so-called "Magnificent Seven" stocks alone (NVIDIA, Apple, Microsoft, Alphabet, Amazon, Tesla and Meta Platforms) and at the same time pushed the DAX down by around 1,500 points. Margin calls also caused a temporary bloodbath in precious metals, from which the gold price in particular quickly recovered.
In the global financial casino, all market sectors are closely correlates
There is no doubt that money flow and liquidity in financial markets have a significant impact on market stability and price formation. Liquidity describes the ability of a market or an asset to be converted into money or currency quickly and without major losses.
A liquid market has enough buyers and sellers to enable trading activities at a fair price, which is especially important in volatile times as it allows investors to react flexibly to market changes and minimize losses.
However, since central banks around the world have been constantly expanding the money supply in the entire banking system for over two decades with extremely low interest rates and monetary policy measures such as "quantitative easing", all sectors in the global financial casino are now closely correlated with one another.
In addition, large speculators such as hedge funds are aggressive and leveraged across all sectors in their search for returns. In emergency and panic situations, so-called " circuit breakers " stop trading on a stock exchange, which further restricts the free market mechanisms and further reduces the already distorted price discovery to absurdity.
Circuit breakers work automatically by stopping trading when prices on stock exchanges and for individual securities reach predefined thresholds.
An ounce remains an ounce
In this respect, the sharp drop in gold and silver prices on Monday was no surprise, but a familiar pattern that has been observed in almost every market crash over the past 25 years. However, anyone who physically purchases precious metals and stores them outside the banking system can view the volatile fluctuations in the markets with confidence. After all, precious metals only fully demonstrate their proven safe haven properties over thousands of years when they are stored outside the highly leveraged and inflated fiat money system.
An ounce of gold remains an ounce of gold, regardless of whether it costs 2,300 or 2,000$!
Gold price in US dollars – consolidation triangle
Four weeks ago, we had given a somewhat lower probability of further rising gold prices and rather anticipated the end of the rally in the area of around 2,430 US dollars.
However, the failed assassination attempt on Donald Trump initially catapulted gold prices to a new all-time high of 2,483 US dollars. This was followed by two sharp sell-offs and an interim recovery to 2,478 US dollars.
However, the rising 50-day line (US$2,371) absorbed the two setbacks and remains an extremely important support for the gold price.
Shortly before the end of the week, the price of gold is currently trading at 2,428 US dollars, already quite confidently above the psychological mark of 2,400 US dollars.
Based on the erratic fluctuations since mid-July, a potential consolidation triangle could develop in the coming weeks. In this triangle, the gold price could initially remain trapped or settle somewhat between approximately $2,385/2,400 on the downside and approximately $2,455/2,470 on the upside.
In addition, the two Bollinger bands are moving sideways between 2,472 US dollars and 2,359 US dollars, also indicating a sideways trading range. After the wild ups and downs of the last four weeks, the gold market would certainly benefit from some calm and at the same time would mean the typical summer lull.
Summary: Gold – Between volatility and doldrums
After the panic at the beginning of the week, a somewhat calmer market phase is to be expected until the central bankers' meeting in Jackson Hole on August 22nd or until the beginning of September. However, the stock markets could be in for another hot ride in September and October or until the US election on November 5th.
In view of the solid supports at around 2,280 to 2,300 US dollars and around 2,350 to 2,370 US dollars, the trend in the gold market remains clearly upward.
At the same time, the situation within the consolidation triangle is likely to calm down somewhat for the time being. The geopolitical tensions in connection with the slightly weaker US dollar due to the disastrous US debt policy and the foreseeable first US interest rate cut in September are ensuring that new buyers keep coming into the gold market.
A technically healthy and seasonally typical correction has not yet occurred and is currently not foreseeable. Only below 2,280 US dollars could one speak of a change in direction. Otherwise, the confusing consolidation will remain, in which the gold price will nevertheless continue to creep higher.
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