Has gold lost its recent bullish glitter?
Many of us technical analysts have lamented the passing of the 'risk on-risk off' paradigm that enveloped the market over recent years. If risk was on; by definition the investment community were bullish in their market sentiment, then indices rose as money flew out of safer haven currencies such as the reserve currency of the USD. If risk was off dollar safety was sought with investment in PMs (precious metals) alos rising, the price of securities such as gold accordingly rose in a correlated fashion.
However, since the fiscal cliff issue, which dominated the investment community narrative late 2012 and thereafter the Fed's obsession with keeping equity prices high by way of their monetary easing programme of $85 billion each month, the risk on risk off paradigm has been broken. The greenback has risen in tandem with equity markets since the Fed engaged in its monetary easing and in many respects gold has detached itself from any risk on/risk off phenomena. Gold has risen, or fallen not in respect of its integral safe haven status, but apparently independent of other market sentiment.
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Over recent months gold has been an incredibly difficult security to trade as a swing/trend trade, or as a longer term position (investment) trade. On June 16th gold's trend turned bearish, this bearish tendency continued up until July 9th when PSAR went above price and many of the other most commonly used and preferred swing trading indicators became bearish shortly thereafter.
However, once again gold is proving incredibly difficult as a trend trade, with the upward swing being incredibly 'shallow' in terms of the price action displayed on a daily chart through the bullish movement which has ended in today's sessions. Despite many of the indicators appearing to lag if trend traders had taken the long trade, once the MACD, PSAR, RSI and stochastics were positive, then staying with that trend, until negative indications appeared on the daily chart as of today's trading sessions, should have seen trend traders rewarded. Or at the very least not suffered a loss if stops and take profit limit orders were strictly adhered to.
As of today's trading sessions gold appears to be developing bearish tendencies. The PSAR has gone above price, RSI is on the median line of 50, both stochastic lines, on an adjusted setting of 9,9,5, have exited the overbought zone, the DMI on an adjusted setting of 20 has yet to turn bearish using the histogram visual, whilst the middle band of the Bollinger band has been breached.
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