A great year for the commodity

Gold is among the most traded commodities and assets in the world in general. There are different ways for trading Gold. However, most commonly traders and investors use derivative contracts, contracts for difference (CFDs), as well as futures and options that gives them access to the market and a great opportunity for trading Gold and taking advantage of the great market movements that it usually provides us with in a short period of time.

Overall performance of the commodity

Why have we picked Gold for our Bonus report this month? Well, we believe it is worth discussing it and analyzing the performance of the commodity as 2020 has been a very profitable year for Gold bulls. In other words, most investors and traders that have been buying Gold especially in the first 8 months of 2020 have been on the profitable side as the commodity went up 43% from the $1450 lows to the $2075 highs in the first week of August. What is the reason for that?

Well, investors and traders interested in Gold should know that it is considered a safe-haven asset. That means Gold is one of the assets that investors consider safer and less risky during such economic slowdowns, political uncertainty and similar negative factors that tend to have a negative impact on the stock market for example. Therefore, investors buy Gold in order to protect themselves during such uncertainties on the market. So, when the COVID-19 pandemic started there was quite a lot of fear among investors and traders that an economic slowdown would follow and that motivated them to look for an alternative investment – a less risky one. So, the interest towards buying Gold increased substantially.

Therefore, Gold started rising in March and bottomed out from the lows at $1450 and bounced 43% to hit the peak for the year so far at $2075 in August. In fact, Gold is among the best performing assets during that period of time and all short-term profit taking corrections have been giving great entry levels for buy positions that have been able to help investors maximize their profitability to the upside.

Yet, since August Gold has been in a downtrend. There are few reasons for that. One of the main reasons is the fact that traders who bought very low and made over 40% return on their investment in less than 5 months were motivated to start cashing in some profits. Moreover, the stock market was very bullish after the huge sell-off between the 20th of February and the 20th of March and investors and traders got excited about buying stocks as the market has been in a massive bullish rally after the coronavirus correction. So, they have been taking profits they had made in Gold and reinvested on the stock market. Furthermore, the positive vaccine news from Pfizer & BioNtech and Moderna have been further boosting the stock market and therefore Gold has struggled to rise much in the recent past. That led to an immediate bearish effect on Gold.  The price then dropped below the $1800 lows to reach the $1770 support on the last day of November and started rising strongly from that level again to reach the current $1880.

Chart: Gold

Overall, we believe the recent correction on Gold is giving a great chance for some short-term buying positions at a strong support level.
We remain positive for Gold and believe it is a good hedge and it also provides us with some great short, middle and longer-term opportunities to benefit from.

Conclusion

Considering the fact that the price is trading at a good 10% discount from the top it reached in August, we believe a bit further profit-taking correction would be giving us a great entry level for a buy position at around the strong support at $1850 where we would start buying Gold aggressively. We are expecting to see lots of buying pressure at that point. Should the price drop further we would keep our long positions and even add more at the next strong support at around $1800, which would give us a chance to improve our average cost basis and make higher profits to the upside. We would start collecting some profit at around $1880-$1890, followed by our next profit-taking target at $1940-$1950 where we would be fully cashing in our profits and waiting for another great entry level for our long positions.


Sincerely,

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