Search LOGIN

WEEK AHEAD: FEBRUARY 08

Short Description

Two major moving averages are painting a bearish picture for gold – I explain the death cross and what I could mean for gold and precious metals this time around. I also rundown the economic calendar. Thanks! Rich

Video Script

Gold death cross - THE WEEK AHEAD (Feb 8-12, 2020)


Hi everyone, hope you’re all doing well and making a success of what I really think is some kind of renaissance for day traders right now. I’m previewing the week ahead and specifically; I’m taking a look at gold and whether the so-called death cross- that’s when the 50-day moving average crosses below the 200-day moving average - means the gold price is set to fall further. And of course, I’ll also rundown this week’s economic calendar.

Let’s take a look at the XAU/USD symbol on the MT4 trading platform. I’ve highlighted the death cross with an orange circle and you can see the 50-day moving average has nearly crossed below the 200-day. No strategy is perfect but according to the textbooks, this is a bearish sign for gold. 

By the way if you’re getting some use from this video for your trading, please click the like button and the YouTube algorithm will make sure more people see it and we can keep making them. 

Right let’s run through the economic calendar quickly and then I’ll talk more about gold. First up on Monday there is Swiss unemployment and German industrial production, which likely slipped back slightly in December. Tuesday, we have China trade balance data – remember this follows the record surplus reported last month. Wednesday is China CPI, German CPI and US CPI as well as a speech from BOE Governor Bailey. Later in the week a number of markets will close for the Lunar New Year. Then on Friday we have industrial production and latest update on Q4 GDP from the UK. 

So why are we placing any value on the death cross? Well, it’s simply that many traders use the 50 and 200-day moving averages to define the trend of the market. The fact that the 50-day MA is pointing down represents the down-trend we’ve had in gold in the past few months. The 50 DMA crossing below the longer-term 200-DMA is a sign that the shorter-term weakness could last a lot longer. Then if ever the 200-day moving average starts pointing down, we can define it as a bear market for gold.

I should note at the time of recording the cross hasn’t quite happened but unless there is a sudden surge in the price, it looks imminent. A “golden cross” when the 50-day moving average crosses over the 200-day happened back on January 22nd of 2019- basically two years ago. The last death cross happened on June 25th in 2018 so on that occurrence it was 7-months between the death cross and the golden cross. If history were to repeat itself the next bullish golden cross in gold would happen in September this year.

And what’s the fundamental story? Governments and central banks have flooded the world with extra money and that has devalued currencies. That’s been a bullish thing for gold and could still put a floor under the gold price moving forwards. BUT as we know, markets are always looking into the future, and it feels like gold has already largely priced in this money printing and deficit spending. Even if Joe Biden gets his next covid-relief package passed, that could have been priced in when gold hit over $2000 for the first time. I suspect for gold to make the next leg up; we might need to see some real evidence of inflation from all the stimulus. That’s probably once vaccines have been rolled out and the global economy recovers further in 2021. The other thing to look at is the dollar, if the dollar decline resumes, that’s bullish for gold But if USD has really bottomed, that’s bearish for gold.

Right thanks everyone, good luck trading this week and make sure to subscribe to our channel so you don’t miss the next video.
 

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. See our full Risk Disclosure and Terms of Business for further details.