The Golden Opportunity: A Bullish Case for Gold Investing

03 Aug 2023

By Eric Lee, Sales Director, Phillip Nova

Gold has been considered a safe-haven asset that helps to preserve wealth during times of economic uncertainty and geopolitical turbulence. Looking at the current market conditions and technical indicators, it suggests that a potential uptrend is on the horizon. Let us dive into the bullish case for gold trading in this article.

1) Weekly Chart Analysis: Signs of Shift in Sentiment

The weekly chart for gold reveals several encouraging indicators that point towards a potential uptrend:

a) Commitment of Traders Report:

After enduring a challenging period of three months during which Large Speculators were net sellers of gold futures contracts, the tide seems to be turning. The latest Commitment of Traders report indicates that large speculators are becoming net buyers of gold. This shift in sentiment suggests renewed confidence in the precious metal and may lay the groundwork for further price appreciation.

b) Weekly Stochastic Indicator:

The Stochastic indicator, a momentum oscillator, has been operating in the oversold region, indicating potential undervaluation. However, the recent upturn in the Stochastic from the oversold region could signal a change in price direction. As buying momentum gains traction, gold prices may experience an upward push.

c) Inverse Relationship with US 10-Year Yield:

Gold’s inverse relationship with US 10-Year Treasury yields has been evident since late 2022. With inflation exhibiting signs of stabilisation, falling yields are being perceived positively for gold. As the US 10-year yield shows signs of peaking since early July, this could provide additional support for the yellow metal’s price rise.

2) Daily Chart Analysis: Building Momentum for Breakout

The daily chart presents further insights into the bullish case for gold:

a) KST Crossing Upward:

The daily KST (Know Sure Thing) indicator provides valuable information about the trend’s momentum. Since crossing upward on July 11th, the KST has continued its upward trajectory. This bullish momentum suggests that gold’s price may have room to grow in the short term.

b) Volume Analysis:

Volume analysis is a crucial aspect of technical analysis, and it indicates the strength of market moves. Observing the gold market’s volume between the price range of 1960 to 1990, there are signs of accumulation. This suggests that market participants are accumulating gold at these price levels, which may indicate their confidence in a potential price increase.

c) Breaking Resistance Levels:

The daily price action reveals that gold is currently facing a resistance level around 1990. Once the precious metal breaks above this level, it could gain significant momentum and set its sights on the next resistance level of 2105. A decisive breakout beyond resistance would signal a powerful bullish move.

d) Strong Support at 1900:

As gold continues its upward journey, it enjoys strong support at the 1900 price level. This support level provides a safety net for investors and helps protect against excessive downside risk.

As the global economic landscape evolves, the yellow metal’s historical role as a safe-haven asset may once again shine brightly for savvy investors. The stage is set for gold to shine bright again.

Traders interested in trading gold can consider trading Comex Gold futures on the Phillip Nova platform or XAUUSD (spot gold) on the Phillip MT5 platform.

In addition, Phillip Nova offers COMEX – Micro Gold (MGC), where the margin is at a fraction of the standard size. What is more, for a limited period only, customers can get to trade this contract at a promotional rate of USD $0.98 [excluding exchange fees].

Trade US Indices, Gold, and Crude Oil at only $0.98*

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My clients benefited from my services including investment advisories in unit trust and stocks, investment insights based on my personal knowledge and experiences while navigating the markets for the past 20 years.

Periodically, I will be send out market analysis to my clients, as well as alerting them of support and resistance levels for the technical indicators which I am utilising on a chart. Click on the button at the bottom if you would like to arrange for a One-to-One Coaching session to learn more about trading futures, forex, stocks and more, and how you can benefit from the services I provide.

Eric Lee is a Sales Director with Phillip Nova. With expertise in Futures, Forex, Stocks, and Unit Trust, Eric makes an all-rounded advisor. Make informed trading decisions without spending time combing through endless information as Eric readily provides clients with trade alerts and insights via WhatsApp. Over his years of experience, Eric developed systematic strategies in trading and investing. Book a complimentary coaching session below to leverage on his expertise as he imparts his knowledge to enhance your trading journey.

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An Exchange Traded Fund (ETF) is a marketable security that is formed to track nearly anything, ranging from a specific index, sector, commodity, or increasingly, theme. They are most commonly used to track a basket of stocks, and can typically be accessed through the same channels as regular stocks. ETFs are typically separated into passively-managed ETFs that simply mirror the security they are tracking (e.g. the STI), and actively managed ones that attempt to deliver higher returns or specific investment objectives, often with a pre-specified theme in mind (e.g. ARK Invest’s Innovation ETF).

Why should I trade in ETF CFDs?

ETFs have been growing in popularity over the years. 2020 was the best year for ETFs yet, with global equity ETFs seeing more than $1T in inflows within a 12-month period. Using CFDs to gain exposure to ETFs allows for greater capital efficiency because only a portion of the contract value is required as margin to establish a position.
ETFs are particularly popular with investors seeking a relatively hassle-free investing experience, while desiring exposure to a range of specific and relatively understandable securities. Trading ETF CFDs brings greater convenience by eliminating the need for traders to hold multiple currencies in order to access global ETFs.
An investor wanting exposure to the post-pandemic economic recovery could open a position in the well-known SPDR S&P 500 ETF (SPY), which tracks the performance of the S&P 500. Another investor that may be convinced of the future importance of Environmental, Social and Governance concerns (ESG) may find the increasing selection of ESG-themed ETFs that track a basket of high ESG-rating companies to be a good investment, rather than cherry-picking individual equities by hand. ETF CFDs can act as a powerful tool for traders can profit from both directions of the market by taking on long or short positions.

A look at two ETF CFDs we offer:

1) Has the ARKK been sunk?

ARK Innovation ETF (ARKK) ARKK is an actively managed ETF by ARK Invest that invests in a range of companies based on their innovative and industry-disrupting potential. ARKK’s largest holdings are in companies such as Tesla, Square, and Zoom. ARKK is down around -33% from peaking on 12^th Feb and is currently in the red for the year to date as the market experiences a risk-off outflow of funds. Superstar fund manager Cathie Wood has however been consistently doubling down on her bets, buying even more shares in growth stocks that are going through their own tumultuous periods such as DraftKings, Peloton, Teladoc, and Tesla. In her view, ARKK is playing the long game, and remains steadfastly convinced in the long-term prospects of these growth stocks beyond this current bout of volatility. Similarly on outflows, investors are still betting big on ARKK as ARK Invest has only lost about $1.2B in assets this year across all its six funds, compared to seeing an inflow of $15.1B during the same period. Recently, investors have been nervously eyeing ARKK’s basket of tech stocks as their future earnings potential remain vulnerable to erosion through high inflation – the dominant concern of the market in recent weeks. As commodities – the major contributor to the recent heightened inflation fears – drops sharply from record highs, are investor concerns over hyperinflation overblown?

2) Searching for exposure to Asian equities?

iShares MSCI Asia ex Japan ETF (AAXJ) The AAXJ is currently trading -10.6% adrift of all-time highs seen in February, giving up gains in tandem with an Asia-wide equity sell-off at the time. Given that slightly over 40% of the ETF’s holdings are based in China, the ongoing tumult seen in Chinese equities currently have carried over nearly perfectly in the AAXJ, as Chinese investors take a breather after the stellar gains made over the past year. Looking ahead, Asia – and particularly China, is steaming ahead with its economic recovery. China is widely expected to be one of the best-performing major economies this year, providing a major boost to the outlook for corporate earnings. As the rest of Asia and the world gradually opens up their own economies, AAXJ is likely to again benefit from strong Asian outperformance amidst a strengthening trade outlook.

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