Today, we want to look at one of the most interesting markets after the Fed rate decision on the July 31, and the next wave of escalation in the trade war between the US and China.
After US president Trump imposed 10% additional tariffs on Chinese goods from September onwards, China allowed the Yuan Renminbi to weaken past the psychologically important line of 7.00 per USD.
That said, chances seem high that Gold is to appreciate further in the coming weeks, since a further drop of the CNY against the US dollar should be expected, and trade tensions between the US and China will likely remain elevated.
With our midterm bullish outlook for Gold due to the fundamental picture drawn above, another bullish driver is delivered from a seasonal perspective.
Seasonal Pattern in Gold | XAU/USD
The key parameter of this seasonal bullish pattern looks as follows: between August 12 and September 05, Gold saw an average gain of 25.09 USD for 16 of the past 21 years.
In the remaining five years, Gold dropped on average only 12.40 USD, while the maximum loss was 40.68 USD and the maximum drawdown being 44.23 USD.
Trade the Seasonal Pattern: GOLD
And now the key question: how could we trade this?
Here’s the plan:
- After identifying the profitable seasonal window, buy GOLD on the closing price of the starting date on August 12 (21:59 CET).
- Identify the maximum loss within the seasonal period. Then, have a look at the daily chart and the ATR(14) indicator.
If the maximum loss is above the ATR(14) reading, round it up to the next round number and use it as worst-case-stop.
If the maximum loss is below the ATR(14) reading, use the ATR(14) as your stop-width (rounded up to the next round number).
- Look at the average gain of the seasonal pattern, and place the take profit at this distance from your entry point.
- If the trade is not stopped out or it does not reach its take profit within the seasonal period, end the trade market on the closing price on September 05.
Looking at current market data, since the ATR(14) in GOLD on a daily time frame is currently trading around 18 USD, while the maximum loss of the window was 40.68 USD, our worst-case stop will be placed based on a maximum loss 41 USD away from our entry price.
Meanwhile, the average gain of the seasonal pattern is 25.09 USD within this period. So, after entering the trade on the closing price of August 12, we would add 26 USD to get our take profit level.
Source: Admiral Markets MT5 with MT5-SE Add-on Gold Daily chart (between May 1, 2018, to July 30, 2019). Accessed: July 30, 2019, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2014, the value of Gold fell by 1.7%, in 2015, it fell by 10.4%, in 2016, it increased by 8.1%, in 2017, it increased by 13.1%, in 2018, it fell by 1.6%, meaning that after five years, it was up by 6.4%.
Check out Admiral Markets’ most competitive conditions on GOLD and start trading from as low as 16 – 22 pips only. To test Admiral Markets GOLD offering in combination with the described strategy above register for a free demo account today and experience the live market risk free!
Discover the world’s #1 multi-asset platform
Admiral Markets offers professional traders the ability to trade with a custom, upgraded version of MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5 Supreme Edition!
Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter “Analysis”) published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
- Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter “Author”) based on the Author’s personal estimations.
- To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
- Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
- The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
- Any kind of previous or modeled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
- Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.