GLOBAL TRENDS WEEKLY

Weekly Trend Momentum and Trading Strategy
for Gold Futures


Prepared by: Patrick MontesDeOca
Date: November 9, 2024
Target Audience: VC PMI Live Trading Floor

Executive Summary
This report provides a comprehensive trading strategy for gold futures, integrating current fundamental drivers with technical analysis. Utilizing the Variable Price Momentum Indicator (VC PMI) AI as a central tool, supported by indicators such as the 14-Day RSI, Bollinger Bands, and MACD, this strategy aims to optimize entry, exit, and risk management decisions.

Market Overview: Fundamentals Driving Gold Prices

  1. Inflation and Central Bank Policy
    • Current Context: Global inflation remains elevated, prompting central banks, including the U.S. Federal Reserve, to maintain higher interest rates to curb inflationary pressures. While gold is traditionally viewed as an inflation hedge, higher interest rates increase the opportunity cost of holding non-yielding assets like gold.
    • Impact: Persistent inflation or signals of a policy pivot by the Fed could bolster gold demand. Conversely, sustained high rates may exert downward pressure on gold prices due to the increased attractiveness of interest-bearing assets.
  2. U.S. Dollar Strength and Interest Rates
    • Inverse Correlation: Gold typically moves inversely to the U.S. dollar. A stronger dollar, often driven by rate hikes, makes gold more expensive for holders of other currencies.
    • Current Impact: Stabilizing interest rates may weaken the dollar, providing support for gold prices. However, 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 periods of economic or geopolitical uncertainty. Ongoing global risks, including geopolitical tensions and economic instability, continue to sustain safe-haven demand for gold.
    • Impact: Escalated geopolitical tensions or economic downturns are likely to support gold prices as investors seek stability.
  4. Central Bank Gold Purchases
    • Ongoing Accumulation: Central banks, notably in emerging markets, continue to purchase gold to diversify away from the U.S. dollar. Notable buyers include China, Russia, and Turkey, adding consistent underlying support to gold prices.
       

Technical Analysis Using VC PMI (Pivot)

  • Pivot Point (VC PMI): $2702, serving as a central pivot for potential price reversion. Trade entries and exits are structured around this level to optimize risk management.
  • Probability-Based Levels:
    • Buy Zones: $2643 (moderate probability) and $2592 (high probability)
    • Sell Zones: $2753 (moderate probability) and $2812 (high probability)
  • Momentum Indicators:
    • 14-Day RSI: Currently neutral at 50, indicating balanced momentum. A move below 40 suggests oversold conditions, while above 70 indicates overbought conditions.
    • Bollinger Bands: Price is nearing the middle band (20-day MA) at $2702, aligning with the VC PMI and serving as a mean reversion target.
    • MACD: Approaching the zero line, suggesting potential consolidation or trend continuation.

Trading Strategy: Entry, Exit, and Risk Management

For Long Positions (Buying Near Support Zones)

  • Entry Levels:
    • First Buy Level: $2643 – Moderate probability support for long entry. Confirm with RSI near or below 50 and price at or below the lower Bollinger Band.
    • Second Buy Level: $2592 – High-probability buy zone, especially if RSI approaches oversold conditions near 40.
  • Profit Targets:
    • Primary: VC PMI at $2702 for mean reversion.
    • Extended Targets: $2753–$2812 if bullish momentum strengthens.
  • MACD Confirmation: A bullish crossover or stabilization at lower levels reinforces long entries.
  • Stop-Loss: Set just below entry levels at $2643 or $2592 to manage downside risk.

For Short Positions (Selling Near Resistance Zones)

  • Entry Levels:
    • First Sell Level: $2753 – Moderate probability resistance zone; consider shorting if RSI nears or exceeds 65.
    • Second Sell Level: $2812 – High-probability resistance level; RSI above 70 confirms overbought conditions.
  • Profit Targets:
    • Primary: Mean reversion to VC PMI at $2702.
    • Extended: Lower Bollinger Band targets between $2643–$2592 if bearish momentum continues.
  • MACD Confirmation: A bearish crossover or flattening at higher levels serves as a signal for short entries.
  • Stop-Loss: Place above $2753 or $2812 to protect against further upside.

Upcoming Cycle Date

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

Strategy Summary

Utilizing the VC PMI at $2702 as a pivot enhances trading decisions with a high probability of reversion. This weekly analysis integrates current fundamental drivers and technical indicators to offer clear entry, exit, and risk management plans:

  • Key Levels: $2702 as the mean reversion target, with buy zones at $2643–$2592 and sell zones at $2753–$2812.
  • Technical Indicators: RSI, Bollinger Bands, and MACD validate trade setups and guide reversals.
  • Risk Management: Implement stops at entry levels to safeguard against unexpected market shifts and ensure disciplined trading.

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.