GLOBAL TRENDS WEEKLY

Gold Futures Weekly Strategy Report

Date Published: November 2, 2024
Prepared By: Patrick MontesDeOca

Weekly Standard Deviation Analysis
& Trading Strategy for Gold Futures

Executive Summary

This report offers a structured trading plan for gold futures by using the VC PMI (Variable Price Momentum Indicator) as the pivot point. The report integrates fundamental drivers with probability-based levels, mean reversion principles, and technical indicators such as the 14-Day RSI, Bollinger Bands, and MACD to optimize entry, exit, and risk management.

Market Overview: Fundamentals Driving Gold Prices

  1. Inflation and Central Bank Policy
    • Current Context: Inflation remains high globally, with central banks, including the U.S. Federal Reserve, maintaining elevated rates to curb inflation. Gold, as an inflation hedge, remains appealing, though high rates increase the opportunity cost of holding it.
    • Impact: If inflation persists or the Fed signals a policy pivot, gold demand could strengthen. However, continued high rates could keep downward pressure on gold due to the opportunity cost of non-yielding assets.
  2. U.S. Dollar Strength and Interest Rates
    • Inverse Correlation: Gold typically moves opposite to the U.S. dollar. A strong dollar, fueled by rate hikes, makes gold more expensive for non-dollar holders.
    • Current Impact: Stabilizing rates may weaken the dollar, supporting gold prices. Conversely, further rate hikes could strengthen the dollar, creating resistance for gold.
  3. Geopolitical Tensions and Economic Uncertainty
    • Safe-Haven Demand: Gold acts as a protective asset during economic or geopolitical uncertainty. Persistent global risks keep safe-haven demand for gold strong.
    • Impact: Continued or escalated geopolitical tensions would likely support gold prices as investors seek stability.
  4. Central Bank Gold Purchases
    • Ongoing Accumulation: Central banks, notably in emerging markets, continue to buy gold to diversify away from the U.S. dollar. Notable buyers include China, Russia, and Turkey, adding consistent underlying support.

Technical Analysis Using VC PMI (Pivot)

  1. Pivot Point (VC PMI): $2763
    • This serves as the central pivot or “VC PMI” level, acting as a key reversion point where prices are likely to oscillate around. All primary entries and exits are structured with this pivot in mind.
  2. Probability-Based Levels:
    • Buy Zones: $2723 (moderate probability) and $2698 (high probability)
    • Sell Zones: $2788 (moderate probability) and $2828 (high probability)
  3. Momentum Indicators:
    • 14-Day RSI: Nearing overbought territory at 65, indicating possible resistance if it crosses above 70.
    • Bollinger Bands: Price nearing the upper band, signaling potential resistance; middle band (20-day MA) aligns with VC PMI as a mean reversion target.
    • MACD: Weak momentum near zero, suggesting consolidation or a potential trend shift.

Trading Strategy: Entry, Exit, and Risk Management

For Long Positions (Buying Near Support Zones)

  • Entry Levels:
    • First Buy Level – $2723: A moderate probability level for a long entry. Look for RSI around or below 50, with prices close to the lower Bollinger Band.
    • Second Buy Level – $2698: High-probability buy zone with a strong likelihood of mean reversion. RSI near or below 40 further confirms oversold conditions.
  • Profit Targets:
    • VC PMI ($2763): Primary mean reversion target where profits can be taken.
    • Upper Bollinger Band and Resistance at $2788-2828: Additional profit targets if momentum continues upward.
  • Confirmation with MACD:
    • Look for MACD to show signs of bullish crossover or flattening out at lower levels, strengthening the buy setup.
  • Stop-Loss:
    • Set stops just below entry levels ($2723 or $2698) to manage downside risk.

For Short Positions (Selling Near Resistance Zones)

  • Entry Levels:
    • First Sell Level – $2788: Moderate probability resistance level; ideal for short entry if RSI nears or exceeds 65 and price approaches the upper Bollinger Band.
    • Second Sell Level – $2828: High-probability short zone with strong resistance potential. An RSI above 70 confirms overbought conditions.
  • Profit Targets:
    • VC PMI ($2763): Initial target for mean reversion.
    • Lower Bollinger Band and Support at $2723-2698: Additional targets if momentum turns bearish.
  • Confirmation with MACD:
    • MACD crossing below the signal line or flattening at higher levels provides confirmation for short entries.
  • Stop-Loss:
    • Place stops above entry levels ($2788 or $2828) to protect against further upside.

Upcoming Cycle Date

  • Next Cycle Date: November 15, 2024
  • Note: Anticipate increased volatility or trend shifts around this date, and adjust positions accordingly.

Strategy Summary

Using the VC PMI at $2763 as the pivot enhances the probability of successful trades by targeting reversion to this level. This strategy combines fundamental insights, probability-based levels, and technical indicators to create a clear and disciplined trading plan.

  • Key Levels: VC PMI at $2763 as the mean reversion target, with buy zones at $2723-2698 and sell zones at $2788-2828.
  • Technical Indicators: 14-Day RSI, Bollinger Bands, and MACD help validate entry points, support reversals, and guide exit strategies.
  • Risk Management: Tight stops at entry levels protect against volatility, and profit targets are set based on high-probability mean reversion levels.

Disclaimer

This report is for informational purposes only and should not be interpreted as financial advice. All trading carries risk. Please consult a licensed financial advisor before making any investment decisions.