FxWirePro: Gold Price Develops Range in Fibonacci Retracements, Major Uptrend Still Robust – Trading and Hedging Ideas

Gold’s price (XAUUSD) minor trend has been developed in Fibonacci retracement levels from the lows of August (i.e. $1,400) and the highs of 2019 ($1,556 levels), it has created various waves in between 38.2% and 88.6% (refer rectangular area in daily plotting).

XAUUSD has tumbled as soon as it reclaimed 78.6% Fibonacci levels (i.e. $1,519 mark) as the rallies in the major uptrend appear to have been exhausted at the stiff resistance area of 1518 – 1519 levels and continued the range bounded swings in the minor trend.

That’s where the display of gravestone doji coupled with hanging man and bearish engulfing patterns have occurred in both daily and monthly plottings.

Gravestone doji and Shooting star at 1,504 (daily) 

Hanging man at 1,513 levels (daily) and at 1527, 1504 & 1514 levels (on monthly chart).

Bearish engulfing at 1483 (daily) and most likely at 1466 levels on weekly terms.

In our recent post also, it has been raised a cause of concern for Gold’s (XAUUSD) rallies in the short run. Bearish pattern candlesticks have hampered the short-term bullish prospects and potential for the 6-1/2 years highs, while the major uptrend extends 6-year highs.

On a broader perspective, the bullish perspective remains intact and the major trend has retraced from the lows of 2015 lows 1046 to the highs of October 2012 (refer monthly chart).

Monthly study suggests that we are dealing with a broader 3rd wave rally of higher scale, which will most likely extend to 1636 (i.e. 78.6% Fib.-projection).

The recent setbacks defended a minor wave 2 setback target at 1519 (minor 78.6 %), which suggests that Gold is ready to resume its broader up-trend straight away. 

The failure swings of this pivotal resistances have plunged and causing the risk of missing another setback into projected wave 4 setback targets in form of 38.2 % Fib.-retracements on different scales at 1446 and at 1406 persists. The breakdown of 1476 (50% Fibs in daily) would confirm a deeper setback, whereas any bounce back from the current levels should receive confirmation and pave the way for our favored bullish stance to a straight extension of the major uptrend.

Well, contemplating all technical rationale, on trading grounds, at spot reference: $1,463.60 levels, one can think of trading tunnel options spread with upper strikes of $1,465 and lower strikes at $1,458.22 levels.

Alternatively, on hedging grounds, we advocated long positions in September month’s CME gold contracts. We now like to uphold the same strategy by rolling over the contracts for Decemberr’19 delivery as we could foresee more upside risks amid global financial crisis.