Is Now The Time To Buy XAUUSD?

If you’re in the forex industry or online trading communities, you’ll have been hearing about Gold rallying to new highs recently. The upward trend has been huge over the last few weeks, and you can’t scroll through Instagram or X without seeing countless funded traders jumping on the opportunity. Although it appears that buying gold might be a great idea, upon further inspection of the charts and fundamentals, it may not be a good buying opportunity for traders right now.  

In this article, we’re going to take a look at the current moves on Gold and everything you need to know! So, let’s get into it…

Gold (XAUUSD) Is Flying – Should You Be Long?

If you’re an avid investor, you’ll have no doubt heard about the giant breakthrough of all-time highs in Gold in the last week. Retail investors all around the world are keen to get in on the action and follow the trend to the upside. The saying ‘if you’re hearing about it, it’s too late’ rings a bell here. Assets are not linear and will not continue moving in one direction permanently, regardless of the economic case stacked up. Institutions will take profits, risk flows will change, the USD may strengthen and Gold will soon see a retrace. The questions you need to be asking yourself are ‘do I want to buy before a retracement’ and ‘will I still be bullish on XAUUSD after a retracement’.

Technical Analysis Of XAUUSD

Looking at Gold from a purely technical perspective, it’s flying. This is where less experienced investors will enter buying positions, assuming that it’ll keep moving to the upside. Sadly, that’s not how investing works. At some point, Gold will have to retrace – assets don’t continually move in one direction. If you don’t know when the retracement is coming, then you should not be taking buys blindly right now. Taking a look at the daily chart, you’ll see there were already 4 incredibly simple trading opportunities to make use of, by using basic technical analysis – nothing fancy.

Looking at where the price of Gold currently is, there is no technical analysis that can be done. The price is beyond all-time highs and there is nothing clear on the left, nor below, to be working with. 

We’re not trying to dissuade you from trading Gold or entering long positions, but you need to question whether you’re just trying to enter due to FOMO, or you actually believe there is a valid trade case here.

Fundamental Analysis Of XAUUSD

The fundamental picture on Gold has been incredibly bullish over the last few weeks. XAUUSD reached a record high last week, compounded by falling US Treasury Bond yields and heightened selling pressure on the USD. XAUUSD rallying has been largely due to increased risk flows, brought about by the weakening of the USD, which has since driven up the price of Gold. The fundamental picture may change slightly over the next week with many investors awaiting the key inflation data which is soon to be released. However, it’s unlikely that the picture will be completely different by the end of next week. It’s no secret that XAUUSD is largely overbought, and it’s thought that many institutions may be taking large positions off the table at this point, ahead of next week’s news.

Have You Missed The Boat on the Opportunity in Gold?

The reality is, if you’re a trader that usually uses technical analysis – you’ve missed the boat on Gold. There is no price action to the left of the current price, meaning you have no idea when the pullback may occur.  

We really have no idea how far Gold could rally – or if the rally is already over.

This means that if you’re looking to buy gold blindly now, there are two possibilities. Either going to be consistently stopped out ,or you’re going to be entering the market with a huge stop loss to allow for the lack of price action confluence in your trade.

We’ve seen so many traders over the years that blindly follow the price and buy directly into the highs. This is gambling – not trading and not investing. If you’re worried that the price is already too high, it probably is and you should await corrective price action and reassess whether there is still a valid trading opportunity before looking to enter. 

How To Predict A Future Gold Rally?

 Gold should not be approached like other currency pairs. Even against the USD, Gold is heavily traded by looking at economic factors, rather than technicals alone. To be aware of rallies on Gold in the future, you need to be constantly aware of the macroeconomic arena.

Think about it like this…

Gold should be traded using fundamentals alone. If the fundamentals make sense, then you have a trade. At this point, start using technical analysis to give yourself an entry into your trade. For example, a demand zone, or trend line breaks etc. It’s also worth noting that Gold typically rallies towards the end of the calendar year, then into the first few months of the following year. If you take a look at price action for XAUUSD over the last 10 years, you’ll see this is a trend that repeats over time. 

Providing you can pair the economic and technical analysis, that may frame some of your swing trades on Gold.

In Summary – Should You Be Buying XAUUSD?

In short, it may be opportune to buy Gold, or it may not. Fundamentals have been stacking up, hence the rally. However, it’s advisable to sit on the fence for now, in our opinion, until the interest rate decision is released and the strength or weakness of the USD is fully discovered.

We’d strongly urge traders not to just jump in long because the price has been bullish over the last few weeks – that is gambling, not trading. Carefully await your trading opportunities and ensure the fundamental case stacks with the technicals.

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