GOLD - THE STORY OF 2019

Gold is the most typical one among the safe haven asset stream. In Asian philosophy, Gold represents Authority, Prosperity, Etiquette and Culture. Therefore, when it comes to this precious metal as one of the trading products, the investor community, particularly in Asian countries, seem to pay the most attention.

Everyone would say that becoming a Gold Trader is challenging, but you never really know what that means until you learn about it the hard way! Trading with the safe haven asset stream has a particular feature which is the high elasticity in regard to the world political or economic events. In this case, Fundamental Analysis will usually play a more significant role than Technical Analysis in trading system, which might put those pure “Technical Traders” into the market trap due to overlooking the importance of Fundamental Analysis process.

Besides, only those traders who had a chance to witness the major breakthrough in gold price from $800/ounce to $1,900/ounce back in the past, could fully comprehend the extreme price level of this precious metal. The technique of “catching the peak & catching the valley” is considered relatively meaningless in the situation when a clear price trajectory in the near future has been established, repeating the story that just happened in the past July.

Gold trend in the Monthly frame - The story has just begun!

As far as Gold price at the present time is concerned , since June 20th 2019, the value has broken the milestone of $147x to officially exit the sideways trend during 6 years accumulating (August 2013 - June 2019) on the monthly frame; and been establishing a new era of growth towards the record of $1,900 /ounce (in August 2011). The story of Gold has just begun!

In the process of analyzing Gold, any inherent risk in the world can originally have a direct impact on the prices. But in general, right now there are 3 most significant factors to determine Gold's target price step towards the end of 2019: Trade War - Monetary Policy (Interest rate) - Quantitative Easing (QE) coefficient.

1、Trade War

The investor community are currently paying too much attention to the US-China Trade War (the two greatest powers nowadays), yet ignoring the fact that there are a series of other trade battles such as the conflicts between the United States - Europe, Japan - Korea, America - Turkey, etc. It is obvious that these wars are predominantly originated from the United States, all aimed at: Scrambling and pulling beneficial economic resources towards the United States.

These trade wars broke out on all fronts under the trigger of Trump, which would eventually bring about a huge source of profits for the United States in order to (1) deal with the global economic downturn and (2) indirectly support USD Index as well as the growth of S&P500 - A very good premise for Trump's next Presidential re-election campaign in 2020.

So in terms of politics, it is quite impossible for these wars to stop completely, all are naturally in the phase of delaying and prolonging the situation, for example the recent US-China Trade Agreements. In the long run, the market will gradually “get used to” the effect of these similar events and Gold market will then no longer react as dramatically as it has in the past few months.

From Trade War to Currency War - The battle has not ended yet

2、Monetary Policy

It is not difficult to notice that the major central banks in the world are pursuing monetary easing policy at present, for instance RBA has lowered the interest rates by 3 times, RBNZ lowered by 2 times (with 50 basic points each time), or ECB pursues a policy of negative deposit interest rates, BOE also has the intention of lowering the interest rate regardless of Brexits outcome. Or for the first time in 10 years, FED has lowered the interest rates twice in a row this year.

Lowering interest rates will stimulate the economic development of a country by restricting the bank deposits segment (stimulating inflation) and supporting business loans. From there, it can be seen that the prospects for the global economy are extremely gloomy when the major countries are struggling to adjust their GDP growth rates.

This global monetary easing policy will not have an immediate effect on Gold but will somehow change the markets perspective towards this safe haven asset and accidentally Gold is able to hold the most value (not falling too deep at least) due to the risk of recent global recession.

3、Quantitative Easing Coefficient

QE is considered as a tool for the Central Bank to stimulate the economy when the interest rate has dropped to 0% (or it is difficult to intervene further). Of the three factors mentioned above, QE will have the most influence and instantaneous impact. For example, on October 10th , ECB suddenly delayed its QE package, causing immediately the reaction of the market: cash flow was transferred from Gold and Commodities to Securities and Bonds (because the profitability ratio of these two factors is better than Gold and Commodities), therefore the rising momentum of Gold has halted and plummeted back to $1,473.

The most remarkable thing now is the QE package being issued by FED in the near future, especially when recently FEDs John C. Williams confidently claimed that FED could fully use regulatory techniques to solve liquidity problems. In addition, FED plans to inject into the economy USD60 billion per month (until Q2/2020) worth of Treasury bills (short-term public debt) to control its benchmark interest rate. If the above plan is actualized, it is most likely that Gold will undergo a great pressure in the medium term. But in the long term as mentioned above, Gold does not hold a chance to decline further after returning to the sideways point where it used to be for the last 6 years.

TECHINICAL VIEWPOINT

According to Elliot Wave (on the Daily frame), Gold currently shows a wave (B) and is about to be transformed into a wave (C) to end the Elliot Wave cycle starting in October 2018. Thus, in the coming medium term, the chart will possibly appear an adjusted point, declining deeply to the $142x area, this phenomenon is also compatible with the aforementioned analysis that the market will get used to trade war situation and almost all major Central Banks have also issued a sufficient signal to lower interest rates during the year. Instead, more QE packages will be injected into the market, which will help to cool down Golds popularity.

The starting point of the wave (A) is compatible for Gold to reduce later and borrow growth momentum in the next long term.

Wave (C) will end when reversing factors start to appear

If the Fibonacci retracement follows a similar result (taking the wave (A) Elliot - which is also a break-point of the sideways cycle, as point 0 Fibo on the Daily frame), at present the Gold price has already tended to level out the landmark 61.8, accompanied by the Downtrend factor on D1, which will make this decline process happen faster. The Fibo 50 and 38.2 landmarks will be difficult to sustain. It is likely that the price will return to the Fibo 23.6 confluence level with the lower edge of Downtrend, then grow again, stop the down wave as well as finish the (C) Elliot wave.

At that time, the new growth cycle will officially start with the Target after exceeding the price peak around $155x zone will be: $ 1572 - $ 159x - $ 165x respectively (Fibo 161.8).

Fibo shows the similar result

To summarize, at the moment despite the fact that Gold price is quite stable around $1,488 zone, once QE package is activated (especially in the event of FEDs QE package), the price can completely plummet after a strong bull in the past. This is a necessary harmonizing rhythm to establish a new growth cycle, which may fall in the last month of 2019 because in the first month of the fourth quarter, national economy tends to grow in connection with the year-end production - consumption highly demand. Gold inadvertently will be under further downward pressure before it begins to grow in the following period.

[LU HUU DUY]

Founder and CEO of Insight4Group (I4G)

Mr. Duy Huu (LTS) is Founder and CEO of Insight4Group (I4G) - one of the vanguard academies of Training Investors in Vietnam about knowledge and skills in trading, expanding portfolio and forms of investment in the various channels under the most practical insight into Cryptocurrency.

He has experience in trading, training, investment consultancy, and owning many portfolios widely in Stock, Forex & CFDs, Binary Options, Cryptocurrencies, etc for over 6 years.

In addition, Mr. Duy Huu (LTS) is a professor of business administration in Sai Gon Gia Dinh College, Co-Founder PK Team and a finance-solving consultant for interpreters, NPO groups by psychotherapy.