Introduction: After a marked uptrend which saw gold reach $3500 at the end of April, with an annual rise of almost 30% since the beginning of the year and $1500 up since the bullish breakout of February 2024 (bullish breakout of the former all-time high of $2075 at the time), the message from technical analysis is as follows: now is not the time to initiate an initial buy position; it's time to manage your gains, as the bullish cycle is showing its first signs of exhaustion. Exhausted bullish momentum does not mean that the market will turn downwards, so let's take a look at the fundamental factors influencing gold's trend in the precious metals compartment.
1. Theoretical long-term bullish technical objectives achieved
The bullish cycle represented by wave 5 has reached its theoretical objectives. Wave number 5 is the last in a complete Elliott wave fractal cycle. In technical terms, this means that upside potential is now more limited than it was a year ago. Key supports are at a distance, making the risk/return ratio very unfavorable for an investor who is not already positioned in the gold market.
2. Signs of a turnaround in flows and demand
Net flows into GOLD ETFs have returned to negative territory. This indicates a retreat in investment demand after several weeks in largely positive territory. At the same time, institutional investors are reducing their bullish exposure to gold futures, according to the COT Report. Stronger hands are taking profits, but not adopting bearish strategies.
3. The US Dollar and the inverse correlation with the gold price
The US Dollar, strongly negatively correlated with gold, is now oversold and on major technical support. The US Dollar (DXY) has been the weakest currency on the Forex market this year, and this decline has contributed strongly to gold's rise. Now oversold, the US dollar will be less of a driver of gold's rise.
4. High interest rates and Federal Reserve intransigence
Long-term interest rates remain high because of the US public debt, and the Fed is adamant about the risk of a return to inflation in the context of a trade war. As long as this situation persists, it will weigh structurally on non-yielding assets such as gold. Naturally, if the FED were to resume lowering the US federal funds rate, this would provide support for the gold price.
5. The commercial and geopolitical context remains decisive
Admittedly, certain extreme scenarios could push gold higher (global economic recession, dollar collapse, uncontrollable geopolitical tensions), but these are exceptional events, and the current period is more about trade diplomacy. Even so, until decisive trade agreements are signed between the USA and its main trading partners, gold can continue to benefit from support on this fundamental aspect.
6. The trade-off between gold and bitcoin should not be underestimated
On the arbitrage front, Bitcoin, or digital gold according to some institutions, has been regaining ground since the beginning of April, rising from $74,000 to just over $100,000. Technical analysis highlights the presence of chartist support on the BTC/GOLD ratio, suggesting that BTC could outperform the gold price over the coming weeks.
Conclusion: Gold's bullish cycle has reached ambitious theoretical technical targets, and the first signs of running out of steam are present. The $3500 mark could be gold's annual top, but there is not yet enough technical evidence to argue for this. Even so, the key now is to secure gains, protect capital and watch for signs of a medium-term trend reversal. The risk/return ratio, both technically and fundamentally, is no longer appropriate for an initial long position in this market.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
1. Theoretical long-term bullish technical objectives achieved
The bullish cycle represented by wave 5 has reached its theoretical objectives. Wave number 5 is the last in a complete Elliott wave fractal cycle. In technical terms, this means that upside potential is now more limited than it was a year ago. Key supports are at a distance, making the risk/return ratio very unfavorable for an investor who is not already positioned in the gold market.
2. Signs of a turnaround in flows and demand
Net flows into GOLD ETFs have returned to negative territory. This indicates a retreat in investment demand after several weeks in largely positive territory. At the same time, institutional investors are reducing their bullish exposure to gold futures, according to the COT Report. Stronger hands are taking profits, but not adopting bearish strategies.
3. The US Dollar and the inverse correlation with the gold price
The US Dollar, strongly negatively correlated with gold, is now oversold and on major technical support. The US Dollar (DXY) has been the weakest currency on the Forex market this year, and this decline has contributed strongly to gold's rise. Now oversold, the US dollar will be less of a driver of gold's rise.
4. High interest rates and Federal Reserve intransigence
Long-term interest rates remain high because of the US public debt, and the Fed is adamant about the risk of a return to inflation in the context of a trade war. As long as this situation persists, it will weigh structurally on non-yielding assets such as gold. Naturally, if the FED were to resume lowering the US federal funds rate, this would provide support for the gold price.
5. The commercial and geopolitical context remains decisive
Admittedly, certain extreme scenarios could push gold higher (global economic recession, dollar collapse, uncontrollable geopolitical tensions), but these are exceptional events, and the current period is more about trade diplomacy. Even so, until decisive trade agreements are signed between the USA and its main trading partners, gold can continue to benefit from support on this fundamental aspect.
6. The trade-off between gold and bitcoin should not be underestimated
On the arbitrage front, Bitcoin, or digital gold according to some institutions, has been regaining ground since the beginning of April, rising from $74,000 to just over $100,000. Technical analysis highlights the presence of chartist support on the BTC/GOLD ratio, suggesting that BTC could outperform the gold price over the coming weeks.
Conclusion: Gold's bullish cycle has reached ambitious theoretical technical targets, and the first signs of running out of steam are present. The $3500 mark could be gold's annual top, but there is not yet enough technical evidence to argue for this. Even so, the key now is to secure gains, protect capital and watch for signs of a medium-term trend reversal. The risk/return ratio, both technically and fundamentally, is no longer appropriate for an initial long position in this market.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.