A golden cross could be coming between the 50 day EMA and the 100 day EMA
The golden cross is a bullish breakout pattern formed from a cross involving a short-term moving average (such as the 50-day moving average) exceeding a longer-term moving average (such as the 100 days). As long-term indicators carry more weight than a shorter indicator, the cross indicates a bull market on the horizon and is reinforced by high trading volumes.
This current rally began at the end of March when gold futures traded at around $ 1,680. It was a pivotal week that saw gold retreat from major resistance, which has now turned to support and resulted in a looming gold cross between the 50 and 100 day exponential moving averages. In this study, we use exponential moving averages rather than simple ones. This is due to the lagged nature of long-term moving averages; we can use exponential averages to get a faster and more tradable signal.
From Friday May 7 through Friday May 14, five of the six trading days resulted in intraday highs of around $ 1,840 to $ 1,844.
On Monday May 17th, gold opened to last week’s highs ($ 1,844) and broke through that old resistance level, and closed above its 200-day moving average as well as the retracement level of 61.8% Fibonacci. The data set used to create the Fibonacci retracement begins in March 2020, with gold trading at $ 1,454 until August 2020, when gold hit its all-time high at $ 2,088. With the exception of Wednesday, May 19, when gold traded at an intraday low of $ 1,851, gold prices remained above the 200-day moving average for the entire week.
The most recent leg of this rally was fueled by concerns about rising inflation. According to EconoFact, inflation was 4.2% in April 2021. The likelihood of it continuing to rise depends on various factors that are contributing to a widespread rise in prices. “
The Econofact article which was published on May 18 went on to say: “There are concerns about rising or even accelerating inflation, fueled by an overheating economy due to the significant fiscal stimulus. , the Federal Reserve’s commitment to keep interest rates low for an extended period and pent-up consumer demand that was abandoned during the pandemic. The last episode of high and rising inflation, in the 1970s, took place in a period of economic distress and only ended with a painful recession organized by the Federal Reserve in the early 1980s.
The Federal Reserve maintains its position that the current level of inflation is only temporary, and their recently modified mandate is to let inflation heat up instead of maximum employment.
At 5:00 p.m. EST gold is trading at $ 1,882.40, representing a net gain of $ 0.50 on the day. Two of the trading days this week resulted in an intraday high of $ 1,890, meaning that for gold futures, $ 1,890 is the last minor resistance price point up to $ 1,900. The fact that a golden cross forms between the 50-day EMA and the 100-day EMA signals real potential of $ 1900 to be realized relatively soon.
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Wishing you, as always, good trading and good health,