After recognizing the mistake and previously being bullish on gold, its price has continued to rise with little resistance, recently surpassing the $3,000 milestone. With this milestone achieved, investors are concerned about how far this gold bull market can go and whether a correction or reversal might occur soon. This outlook explores these questions briefly.
Firstly, regarding the bullish target, we previously discussed that once the triangular formation ended, new upside potential opened up, with the target for a bullish rally pointing towards the $3,300 resistance area. Based on current prices, there's roughly a 10% upside potential left in the medium term. Considering gold's historical volatility and its low points at the beginning of the year, this target aligns with past patterns. To achieve further progress, significant positive news is needed, such as major geopolitical conflicts or a meaningful recession in the U.S.
Regarding the possibility of price correction and reversal, the likelihood of a trend reversal currently appears low, with only a potential for a corrective pullback. We can monitor the changes in the futures-spot spread. As the current front-month futures contract nears its expiration and prepares to roll over to the June contract, the futures price is approximately $3,025, with a roughly 1% premium over spot gold at $2,988. This is considered a normal spread level, theoretically supporting the argument against early predictions of adjustments. Typically, if the futures premium is low, it suggests the market is not overly optimistic about the future, indicating a possibility of short-term retreats. Additionally, silver has performed similarly to gold over the past month, leading to the assessment that significant adjustments at the $3,000 level are unlikely. At the very least, market reversal attempts will not occur in a single try, ensuring the reliability of any dual-headed patterns.
However, this does not mean it's advisable to chase gold's rise blindly. In reality, even with a $3,300 mid-term target, buying at current levels offers mediocre value, particularly when considering time costs. If missed, the best strategy remains waiting for pullbacks. Gold has experienced several gaps in recent markets, suggesting a need for future fill-ins. The 2,735/2,794 range, which represents a weekly line breakout, marks a critical juncture for bulls and bears, and this lower end can be set as a potential stop-loss point if a buying opportunity arises in the future.
Lastly, regarding the gold-silver ratio, a reading of 88 is relatively unattractive. Although we previously noted that long gold and short silver might only lose time over the long term, the current graphical structure suggests that hedging strategies involving gold and silver are not very effective. It might be wise to wait for the ratio to fall to around 84 before exploring trading opportunities. If you're not optimistic about precious metals in the short to medium term, shorting silver might be preferable to shorting gold.
In summary, the gold trend is still ongoing with no immediate signs of reversal. However, from a trading perspective, entering at these high levels lacks clear value. For the future, one should wait for a second failed attempt to push higher and then look for opportunities to buy during pullbacks.
$E-mini Nasdaq 100 - main 2506(NQmain)$ $E-mini S&P 500 - main 2506(ESmain)$ $Gold - main 2504(GCmain)$ $Silver - main 2505(SImain)$
Comments