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Weekly Commodity Review - Gold

Spot Gold - Weekly

1W chart for gold (Source: OvalX)
Historical performance does not guarantee future profits.

The weekly chart details how in the summer of 2020 gold prices peaked at 2,075 before retracing back to 1,700 in early 2021. Before this it was building a move back towards these highs earlier this year, before once again losing ground.

Are the current lows a “simple” retracement, similar to those in 2020, or the start of an even more meaningful correction of the 5-year positive bullish trend from the lows in 2016?

While the summer 2020 lows are held, the outlook can remain positive. On sustained moves under 1,700, however, concerns will increase over possible moves back towards the 2016 lows of around 1,050.

Spot Gold - Daily

1D chart for gold (Source: OvalX)
Historical performance does not guarantee future profits.

The daily chart shows us in more detail how the 2020 lows were breached on the recent leg lower. This is a major long-term concern as this may indicate the higher interest rate environment may be shifting the long-term positive trend in place over the past five years.

The good news for investors is that price action has been able to post a decent recovery in the past few days, supported by a more widespread return by investors to more risk-on assets.

The bad news is that, so far, this minor recovery has only been enough to lift price back to the upper end of the medium-term bearish trend, which can be seen clearly on the daily chart.

The daily chart has a very clear medium-term negative move through 2022. This suggests the recent buying interest may falter soon, as this appears to be the dominant trend.

If buying was to ease and we had sustained moves back under 1,700 this would then start to question the strength of the long-term positive trend.

Nervousness will remain while gold stays around the 1,700 area. Buying interest has been decent in recent days, but more work needs to be done to feel confident this is a repeat of the recovery seen in 2021. We now need to see moves back above 1,800 to provide increased confidence.

Until then we still need to label the current gains as a bear market rally, which remains vulnerable to future falls back under 1,700. On any future moves above 1,800, the market would then look ready for a push back to the 2,050 highs. At this point price action may be able to accelerate higher.

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Please note that the presented content refers to the Oval group which contains two legal entities: Monecor (London) Limited authorised and regulated by the UK Financial Conduct Authority (FCA) with Financial Services register number 124721. Monecor (Europe) Limited authorised and licensed under the Cyprus Securities and Exchange Commission (‘CySEC’) with license number 096/08.