This is my new project for 2020. I will be spending this December exploring the basics and deciding how to proceed with this. Last week I took my first trade ever in XAUUSD and will be gradually getting more involved as things develop.
As is usual with my trading interests, I want to take a broad approach and learn about the physical commodity itself and its history and surrounding industry, as well as following the current market and trading.
My trading style is almost 100% TA, based mainly on a mixture of various MA’s and basic PA principles and techniques.
This is more of a journey than a journal and will probably start slowly and hopefully gather steam as we get into the year 2020.
The monthly ranges (bars) from 2000 to 2008 were very much smaller than in the years since then. Volatility has clearly increased enormously. Is this a direct outcome of the financial crisis at that time?
Gold value was steadily increasing during those first eight years and then increased at an even greater rate, which finally preaked out in 2011.
This was followed by a period of very broad sideways price movement until 2013, when a bear market broke the uptrend.
This downwards move lasted 6 months and took Gold into another broad range that persisted for the next 6 years up to the summer this year, 2019.
Prices since the summer breakout from the previous range have not, however, yet managed to set any new highs.
So this is where we are approaching the end of 2019: Prices have broken out of the long-standing range but have yet to confirm a new uptrend via a higher high. So the big picture is that we are waiting for the next significant point, i.e. either a new high or a slip back into the earlier range.
And now, within that big picture, one can start to look at trading opportunities on the lower timeframes.
I am starting trading Gold with the same core set-up and interpretation that I have always used with FX and other commodities and will be trialing with simple in-outs during December to see what tweaks, if any, are appropriate.
The Daily/4-hour chart combination is my core timeframe environment for trades and, in addition to some basic PA stuff, I am working with a 20-60 ema band and 200-period SMA’s from the 4H, Daily and Weekly TFs
Currently, the 4H chart is suggesting an upmove but is overshadowed by the daily chart band. This combination usually produces some erratic candle behaviour which favours some pip-snatch moves rather than a longer term trade at this time. We are also hovering around this 4H 200-period SMA at present.
This first dip in the water seemed to justify this expectation with an early upmove followed by a down candle. This sequential up/down candle pattern seems very prominent on all TFs. Something to keep in mind when timing entries.
Its been a quiet day and the daily candle is forming an inside day. Price tried to rise above the 200-period SMA early on in the day but failed to hold there and has traded below it most of the day. This would suggest seeing some lower prices tomorrow.
But contrary to that, price has remained above last week’s range, which is encouraging but we could see a slip down to the top of that range around 1465.
The MA band is entering into a compression stage which may well last during the rest of this week.
Like Oil prices, Gold, being mainly priced in USD, is influenced by the direction of the dollar in an inverse manner since a stronger dollar makes Gold dearer for other countries and depresses the Gold price.
In the same way, Gold is a safe-haven commodity like the JPY and these tend to trend in the same direction. Therefore the evolution of the price of XAUUSD tends to inversely mirror the USDJPY in broad terms, as shown on this comparative weekly chart:
No change overnight. Still hugging the 4H 200 SMA. And still trading above last week’s range.
The 200 SMA on 4H charts can be a strange beast. When markets are directionless it acts like a magnet (just because there is little else to focus on), but when the price is moving for a reason then it is as though it isn’t there at all.
But this is the same with all TA lines, patterns, levels, etc in any market. When price is actually going somewhere for a reason, don’t get in its way!
But the lower the TF the more insignificant such TA levels become - unless there is nothing else much going on…!
An interesting chart from the World Gold Council ( a great source of information on the Gold markets) showing the structure and flows of the Gold market.
Gold is a fascinating market for trading. It is a physical commodity with all the stages of exploration, mining, refining, distribution, storage and application. Each of these is a wonderworld of interesting knowledge.
But Gold also has a vast, highly liquid and broad market for both the physical product itself and for financial interest.
In other words, Gold is both a commodity and a financial asset - two birds in one cage from a trader’s point of view.
Gold can be looked at as just a component in various forms of industrial production, or as just a boring, stuffy, dusty block of metal stored away in some vault somewhere, or as a source of great beauty demonstrating the best of human craftwork both today and throughout history going back thousands of years.
It is always fascinating to trade a product that has an identity that can be delved into rather than just staring at a chart with lines on it.
One other draw factor with Gold is that it is somewhat distant from the useful factors affecting currencies and stock indexes. Although related to these and influenced by them, it has its own life with its own set of factors driving its value. It is therefore rather less directed influenced by the tweets and comments and events that put so much uncertainty into currencies and share markets at present.
How much gold is there in the world? (above ground)
The World Gold Council estimates that all the gold ever mined totaled 190,040 metric tons in 2019 but other independent estimates vary by as much as 20%. At a price of US$1,250 per troy ounce, reached on 16 August 2017, one ton of gold has a value of approximately US$40.2 million.
So where is it all?
These are the top 10 national Central Bank holdings:
Went long in the morning on the basis of a positive MA band, but that 4H 200-SMA just kept holding the price down.
We eventually got a break up through it but with a weak follow-through. I had been hoping for it to reach up to that black downtrend line but that seemed so unlikely now prior to the NFP tomorrow.
Since I am in the early learning stage with Gold, I was concerned about the reaction of Gold with tomorrow’s NFP release (my first while watching Gold). So I decided to take the ticks now and watch from the sidelines tomorrow. It is a learning period afterall, so let’s see what there is to be learnt here before the weekend.
So, although the Gold price has only drifted off a little, it seems it was the right decision to close out yesterday on what has turned out to be the highest candle since then(red-ringed).
It is somewhat frustrating to have started this venture with Gold in a static mood with no underlying trend to speak of.
This is the 1Hour chart where we can see that the superimposed 4H 200-SMA has held prices down all week even though price has managed to hold above last week’s high.
The neutrality of the current market is emphasised by the fact that the blue/yellow 4-hour EMA band is virtually on top of the grey Daily chart EMA band.
So we have the NFP soon today. In theory, strong employment data is good for the dollar, which is also generally speaking negative for gold prices. But that inverse correlation between Gold and the USD is very broad and may not necessarily follow that closely unless the data is significantly beyond expectations (or there is a major revision to last month’s data).
So, as a novice Gold trader, I am sidelined and in learning mode for today’s release and I will not be carrying any open gold positions into the weekend either. I have to keep reminding myself that I have set December as a learning and setting up period ready for launch full-time in January 2020.
u can trade gold as u trade everything else, look out for dollar index and news, also usdjpy has a very high negative correlation with xauusd. i personally look on gold first evertime when i open the charts, it s my favorite commodity to trade, i found that it respects levels and also trends the most out of the pair basket. actually in sept and october 78% of my trades were made on gold.
1 hr fib after weakness was shown at the monthly high and r2, fake break of the 61.8 fib and down she goes, even on the news the setup plays out lol, that s a nice gold trade and on 15m u can see the green colored volume which stands for climactic volume and the reaction was fading the move up to catch breakout and continuation traders long and drop. really nice high probability setup, to bad was on the news this time
Not much to add, a quiet day, not surprisingly given the events coming later in the week regarding Fed rates and the possible increase in US tariffs on China trade. Is Nth Korea also likely to enter the frame?
A larger position size, smaller move, but still green, and slightly tuned-up charts:
