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Market Analysis

Is There an Easier Way to Forecast Gold?

June 06, 2019
BY Emma Richards

Have you noticed how most of the trading journals and forex news sites are routinely writing about gold? There are over 100 trading options available, and yet gold always seems to be there on the forecast list. This is because of the market behavior we’ve been seeing over the last six months.

The four major forex currencies are showing extreme volatility, which can present excellent trading opportunities, but volatility is not always preferred by traders. Some look for opportunities that offer easier analysis and more reliable forecasting conditions. If that’s you, then gold could be exactly what you’re looking for! This article is going to give you a very simple naked-eye perspective on tracking and forecasting XAU reversals before they begin.

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Gold this week

Is the bounce due for XAU and will it be a big one?

XAUUSD has had a solid few days with a golden rally that started on May 30 and continued into June. The rise from 1276 to 1312 had little to no retracing, which could indicate that the high won’t last. In addition, the stochastic indicator shows consistent “overbought” signals throughout the rally, suggesting the crowning we see on the chart above is, in fact, a major reversal.

Gold on repeat

The clockwork highs of XAUUSD.

Market prices have a habit of surprising us all with unexpected spikes, rallies, and even crashes. But can we say the same for gold right now? As you can see on the chart above, gold has regular volatility, which makes trading the peaks and troughs an exciting activity full of potential profit. Rather interestingly, the XAUUSD reversals are occurring in a clockwork cycle that traders have been able to enjoy for quite some time. Moreover, XAUUSD has been locked into an 1140-1370 range since December 2018. And there’s nothing on the horizon that suggests this pattern won’t continue… yet!

Eyeball analysis of XAUUSD

Gold is on a high point for the year, but for how long?

Let’s take a look at the bigger picture. As you can see on the chart, the current range is on an overall high with routine bimonthly reversals, but there is a long-term downward trend forming which resembles the previous highs of Q1.

When making your technical analysis to forecast the next XAUUSD reversal, keep in mind that gold might be slowly heading back to the 1185-1230 range of last year. If gold is entering a long-term downward trend, Buy orders during oversold periods might present more risk and less profitability. To ride the long-term downtrend more efficiently, consider Sell orders only and wait for the rhythmic rising rallies to finish before the next sell order.

As always, there’s no guarantee that gold will behave logically. After you’ve checked the live price charts with your own eyes, run multiple indicators before committing to a trade. There’s very little fundamental influence on gold, so if all signs and signals point to a fall, then consider hitting the Sell button while the prices are still high. The last time this happened, the downtrend lasted three months.

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