As 2018 gets rolling, some very interesting trends and already taking place in the forex market. Especially in XAUUSD (spot gold), a personal favorite of mine as XAUUSD is by far my most reliable and successful trading instrument.
That’s because in the 27 months since September 2015, I’ve delivered a net gain of 5,137 pips in profit in spot gold. That’s an average gain of 83 pips per trade including losses.
To put 5,137 pips profit into perspective …
… every one lot contract traded means about $51,370 in your account. All in just 27 months. This is the type of gain that grows a small account into a medium sized one, and a medium sized account into a very large one.
But right now, things are looking brighter than ever for the yellow metal’s trading prospects. The potential gains in XAUUSD in 2018 could put my existing spot gold results — as good as they are — in the shade.
I’m going to give you all the details in just a moment.
But first, let’s look at the US Dollar Index. That’s because what’s happening in the dollar is usually reversed in gold and gives even more weight to what I’m about to show you in XAUUSD.
The dollar’s starting 2018 much as it did the previous year: with a long losing streak. As you can see below, the greenback has fallen for five consecutive weeks against its major counterparts. That’s despite three Fed interest-rate hikes in 2017 plus the Fed Fund futures projecting an implied rate of 1.94% for 2018.
In fact, the dollar appears headed to the support line of the longer-term, very bearish megaphone price pattern.
That’s just for starters. Once it breaks that neckline, there will likely be some backing and filling before a further large drop equal to the height of the original megaphone top. That would translate to a price of 108 from the current 117.5.
Interestingly, this is happening even as the Fed is projected to keep hiking interest rates. The greenback’s current and projected future losses seem to reflect external factors with competition from other top central banks (ECB, BOE, BOC, & BOJ) as they begin dialing back their respective monetary accommodation policies.
It seems that as the world’s central “normalize” interest rates, USD will be the loser in the weeks and months to come. That’s great news for XAUUSD.
First, let’s take a look at the monthly chart for spot gold. This is a very long-term chart as each bar represents an entire month of price activity.
Note that XAUUSD put in a double bottom on the monthly chart in the mid 2015 and early 2016 timeframe. The bullishness of this double bottom wasn’t apparent until its accompanying support line was re-tested in 2017 and the bullish trend confirmed.
The more recent pattern is the symmetrical triangle I’ve identified. Once the price breaks out of such a triangle, it tends to keep moving in the direction of the breakout.
Even more bullishly, in December 2017 the price made a key reversal at the apex of that triangle. A bullish key reversal is when the price makes a new low and then closes at the high. That the low of this particular key reversal coincided with the symmetrical triangle’s apex just adds fuel to the bullish fire.
So how high is spot gold likely to go?
To project future gains, we measure the price distance between the top and the bottom of the symmetrical triangle. That’s about $175 an ounce. We add that figure to the current price and this strongly suggests a move to $1,480/oz, perhaps even $1,500/oz.
(Yes, this is a lot like the price projection down to 108 for the US Dollar Index based on the megaphone top.)
Now let’s drill down a bit and look at the weekly chart.
On a weekly chart, it looks like the market is stuck in a range between 1100 and 1380 and unable to move anywhere with authority.
However, there’s also a significant double bottom apparent here too. This is the same double bottom we saw on the monthly chart but in more detail. Here we can see more explicitly that the XAUUSD price has been holding above the support line for some time now.
We’re also about to test the upside of the resistance area. I expect a bit of sideways price action once we hit that level and break through the first time.
But I don’t think there’s much doubt now about the eventual and very bullish momentum once it gets its second wind.
Now for the daily chart …
Here we see what I call an ascending broadening formation. This is a bullish formation although there were two false breakdowns below the support line.
That the price has returned within the ascending broadening formation means spot gold is now ready to run hard at the upside.
The very first target on this daily chart is the gap at $1,340/oz. XAUUSD should rise to fill that gap shortly.
Then the next target is a $1,480, even $1,500 an ounce. That’s $175-$180 an ounce higher than today’s prices.
Gold could eventually go even higher than that, but for now that’s a big enough target to make a long position in XAUUSD a very promising trade. One big enough to make 2018 another one to remember.
In fact, XAUUSD could easily rival my biggest trade in 2017: long GBPNZD.
Way back in October 2016 I predicted a massive reversal higher in the British pound against the New Zealand dollar currency pair (GPDNZD). And yes, this pair rose dramatically from 170 to almost 199. We eventually banked 3,357 pips in profit in just that one pair. That’s a LOT of profit.
Going long XAUUSD this year could be even bigger and better.
In fact, my and my Position Trader members are already long and showing some excellent gains. We have open positions in XAUUSD showing 210 and 140 pips already.
If you’re not ready to just in just yet, I have help available.
I’m going to hold a LIVE 2-Day Bootcamp where I’ll demonstrate exactly how to make currency trades just like the ones I’ve outlined here, including my “Lazy Trader’s” 5-step execution plan that’s pulled in more than 9,000 pips in the last 12 months.