Gold (XAUUSD) Price Forecast: Value Buying Sparks Rally—Sell-the-Rally Next?

Gold Bounces Back and It’s All About Value

Spot gold (XAUUSD) and Comex April Gold futures are edging higher early Wednesday. I don’t think the current two-day rally has anything to do with Treasury yields, the dollar or a potential peace plan in the Middle East. This current rally is all about value.

After a steep nine-consecutive day sell-off, spot gold is bouncing back because of a successful test of the 200-day moving average at $4102.82 today. The actual low for the week is $4099.12.

Gold Players Are in Investment Mode

The fact that gold players are ignoring today’s firm trade in Treasury yields and the U.S. Dollar tells me that they are in investment mode right now. What I mean by this is that long-term bulls liked the price when it plunged into bear market territory on Monday when it fell through $4481.78 and they bought it.

I think that as a long-term investor, you should always be aware of value zones and the major support and trend indicators like the 200-day moving average. Scanning Twitter earlier this week, I found many users caught up on the “why is gold going down during the war” thing.

Price Is the Only Thing That Matters

Investing is all about price, not about the influence of a not-even one-month old war. I always say that if you didn’t get in at $3886.46 on October 28 and you didn’t want it at $5602.23 on January 29, then where do you want it. If your goal is to try to rationalize the gold market with a series of tweets then more power to you.

But if your fundamental and technical work indicate you should be long gold then at a minimum, you should have been looking at the 50% to 61.8% retracement zone of the five-month range at $4744.34 to $4541.88 for a buy. Even if that failed, your backup plan should’ve been a rotation to the 200-day moving average. I hate writing using hindsight, but sometimes it can’t be avoided.

But using foresight, you have to have seen this pattern before across numerous asset classes, sectors, commodities and stocks. Only the prices have changed. Nothing is going to work perfectly, but it can if you define what kind of trader you are. Reading the Tweets, I really don’t know what some of you are doing in the market, long-term, short-term, investor, trader. If you don’t know what you are then you’re going to continue to get freaked out by the swings.

Here’s What I’m Seeing as a Short-Term Trader

Here’s what I’m seeing as a short-term technical trader. First, my trend is down as measured by two metrics, the swing chart and the moving averages. And if I wanted to, I can even go back to the closing price reversal top at $5602.23 to find my first momentum shift.

Ask yourself, are we making higher tops and higher bottoms, or lower tops and lower bottoms? If you see the latter on the chart then the trend is down. Clearly, you can see what happened when the 50-day moving average around $4969.87 was violated and you can see the reaction to the 200-day MA around $4102.80.

So as a short-term trader, I’m in sell the rally mode with my shorting zone identified as $4744.34 to $4850.68. This is the best area in my opinion because I can control the risk the best here.

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