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How to Use Technical Analysis for Gold Trading

There are many methods of technical analysis for gold trading. You can choose the type of gold trading that suits you best. This can include trading gold as an ETF or commodity. There are many different indicators to consider, as well as an overall sentiment, which can help you to make a smart decision. The key is to use a combination of indicators and patterns.

Fundamental analysis

There are some basic differences between technical analysis and fundamental analysis. Technical analysis uses the price history of tradeable securities, while fundamental analysis focuses on the company’s fundamentals. While both methods have their merits, they are not mutually exclusive. The most effective traders use both approaches. Fundamental analysis is particularly useful for companies with complex financial statements.

Fundamental analysis is important for identifying profitable opportunities. It takes into account the underlying factors that affect the market in general. For example, it looks at factors that might affect the price in the long-term, such as economic data and the state of the economy. It also takes into account the sentiment of the market. The key differences between technical analysis and fundamental analysis are that fundamental analysts are not interested in past price paths.

Weekly chart

When analyzing the price movement of a certain currency, the Weekly chart is an essential tool. It shows the support and resistance levels of the currency. It also shows potential reversals. As a result, you should be able to identify the correct buying and selling points. Once you’ve identified the correct support and resistance levels, you can use the Weekly chart to identify the trend and trade accordingly.

The price of gold has broken below the 50-day moving average at $1,746, but is still trading above the bearish trendline drawn from the March highs. This trendline was touched by heavy selling pressure during mid-August, which suggests that this level will remain a major hurdle in the short-term. In order to materially reverse the bearish trend, gold must decisively break above the 50% Fibonacci retracement level (2022 low-high) level.

Correlations between gold and silver

Correlations between gold and silver in a technical analysis chart show that the price of the metals tend to move in tandem most of the time. This is based on correlation coefficients, which quantify relationships between different data series. In this case, the correlation between the two metals is positive.

Correlations between gold and silver have a high level of reliability. In the last year, the correlation between the two metals reached 86.8%, the highest since 1969. However, there was a significant 8.7-year uncorrelated period during the secular bear. During this time, the r-square between gold and silver was 85% over 11,263 trading days. This means that almost 6/7ths of the price action in silver was driven by gold.

Impact of Fed policy on gold

The next few days will be crucial for gold prices as the Fed meets to discuss its monetary policy. While it is expected that the Fed will raise rates this year, two Fed officials recently downplayed the possibility of raising rates by a further 100 basis points. The markets are already factoring in the likelihood of a 75 bps rate hike, but Fed policy guidance will determine whether or not it is a possibility.

Historically, gold has performed better during hiking cycles. This pattern could continue during the current cycle, but the dollar’s uncertain path will reduce the safe-haven effect. The current cycle has similarities to previous hike cycles, although it is not as clear as the one in 2000. Gold prices rose as interest rates rose, but fell during the bear market of the ’80s, indicating that other factors may have a greater impact on its long-term performance.

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