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Fundamentals

During the Asian session on Tuesday (December 5), spot gold fluctuated upwards slightly and is currently trading around 2037. Yesterday's gold movement was a dramatic surprise. It surged by $75 to a record high of $2145 in the morning session, and then plunged by $120 to as low as $2020! What happened? In part, it was driven by expectations. The spike was propelled by the rate-cut bets early next year, despite the hawkish expectation management, but the biggest factor was the stop-loss orders being triggered. The plunge was due to the adjustment of the optimistic rate-cut expectations and the profit-taking. With the Fed officials' expectation management, Morgan Stanley, Goldman Sachs, and Bank of America are trying to cool down the market. Currently, the market has lowered the probability of the first Fed rate cut next March. Gold prices are back to levels seen last Thursday. The price is unchanged, but the money is gone, and this may be the voice of many investors. The market's strong hands always make excessive expectations, which is also a means of washing trade. Yesterday, we said the market was too optimistic about next year's rate cuts and ignored the Fed's expectation management. We also expected an intraday pullback and recommended investors go short at high levels. That's what we're going to do. Don't worry too much about the news flying all over the world, but focus on the market. If you look wrong, you will pay the minimum price, and if you see it right, you will catch a wave of considerable profits. Of course, this is a tough test of our ability to hold positions, which is accumulated over time. Subjectivity is hard to do, only start with a planned transaction! Returning to the short-term trend of gold prices, I think that since the market's overly optimistic expectations will be adjusted, gold prices will continue to pull back in the short term, and trading should also be treated as a correction.

Data: US factory orders fell 3.6% MoM in October, which is the lowest since April 2020, compared with the expected decline of 2.6% and the revised increase of 2.3% from the 2.8% increase in the previous month. The Eurozone Sentix investor confidence index in December was -16.8, compared with the expected -16.4 and the previous value of -18.6.  

Institutions: Following JPMorgan and Bank of America, Goldman Sachs also issued a warning: the market is overpredicting that the Fed will cut interest rates, and Goldman Sachs expects to cut interest rates by only 25 bps next year.  

Today, investors need to pay attention to the US ISM non-manufacturing PMI for November and the JOLTS job openings for October. This week's focus is on the non-farm payrolls and ADP data.  

Technical Analysis

Yesterday, gold prices reversed in a deep inverted V-shape. Gold prices surged sharply higher in early trading, hitting an all-time high of 2145. Subsequently, gold prices fluctuated downward, stopped falling around 2020, and finally closed a full bear candle with a long upper shadow. At this point, the gold price trend has also shown signs of a top, forming a bearish penetration pattern. At the same time, the signs of bearish divergence have not changed. The MACD indicator on the daily chart is in the overbought area and tends to form a death cross. But judging from the hourly chart, after yesterday's plunge, the MACD indicator has entered the oversold area and has formed a golden cross. During the day, gold prices may rebound at the hourly level, and the specific strength of the rebound depends on the momentum. Investors could be temporarily concerned about the slight rebound in Asian gold prices, and the resistance level is focused on the 2050 area. Support can be seen around 2020, and further support can be seen in 2010. The trading reference range today is 2010-2050, and it is recommended to buy low and sell high and pay attention to controlling stop loss.

Trading Recommendations

Trading Direction: Long

Entry Price: 2010

Target Price: 2050

Stop Loss: 2005

Support: 2020.000/2010.000

Resistance: 2050.000/2065.000