Gold: Buy during market dips in 2024

• Gold prices dropped due to Fed rate cut expectations, but long-term prospects remain positive.

• Weakening economic data, ongoing geopolitical issues, and a potential Fed policy change suggest higher gold prices.

• Short-term consolidation is likely, but price dips present buying opportunities, particularly in June 2024.

Gold prices have been under pressure during the European session, reversing some of the previous gains. This recent dip is primarily due to expectations of a Federal Reserve rate cut later this year, driven by weak US economic data. The disappointing data has weakened the US Dollar to its lowest point in nearly two months, which typically benefits gold due to its non-yielding nature. In addition, ongoing geopolitical risks are enhancing the positive outlook for gold, indicating that any decline might present a buying opportunity for traders and investors. Significant upcoming US economic releases, such as the Nonfarm Payrolls (NFP) report on Friday and central bank decisions from the Bank of Canada (BoC) on Wednesday and the European Central Bank (ECB) on Thursday, could impact gold prices by influencing global economic sentiment and currency markets, leading traders to proceed cautiously.

Despite these factors, gold prices might see short-term consolidation before establishing a firm bottom. Recent US data, including a drop in the ISM Manufacturing PMI to 48.7 and a steady PCE Price Index at 2.7%, signal a slowing economy that favors a lower interest rate environment. This has resulted in lower US Treasury bond yields and a weaker US Dollar, which, along with persistent geopolitical tensions in the Middle East, could further bolster gold prices. However, traders should be prepared for short-term fluctuations before the expected upward trend resumes, ensuring they can navigate the market's volatility and leverage long-term growth opportunities in gold prices.

Buy the next dip in Gold

From a technical perspective, the gold market corrected lower in the last few days of May 2024, closing the monthly candle with sharp shadows, similar to the pattern observed in April 2024. This movement was expected and communicated to premium members, with expectations that the last day of May might be negative. The monthly candles now show sharp shadows pointing to a downside or consolidation phase before the next upward momentum. This pattern suggests a strong bullish momentum within the ascending broadening wedge formations, with high volatility expected to continue. The significant economic uncertainty and geopolitical crises will further fuel this volatility and initiate a strong upward move.

The above chart also reveals an inverted head and shoulders pattern within the ascending broadening wedge, indicating that the breakout from $2075 was pivotal, and prices will likely trade higher in 2024. However, the sharp shadows in April and May candles suggest price consolidations in June, presenting potential buying opportunities for July and the following months based on the strong bullish price action seen on the monthly chart.

The seasonal chart of gold supports this view, showing that June has only a 40% chance of positive monthly closing, while July has a 75% chance of positive monthly closing over the past five years. A price correction from recent highs, highlighted by the black rectangle in the chart above, is considered a strong buying opportunity for long-term and medium-term traders targeting $3,000.

How to trade Gold during seasonal corrections

Trading gold during geopolitical crises and economic uncertainty is challenging due to strong price movements in either direction. Therefore, selecting a trade in gold can be tricky. When prices attempt to form a bottom, sometimes the numbers are exceeded, or the entry is missed due to solid price movements preventing entry at higher levels. Consequently, traders can consider buying gold when the price has corrected and confirmed a bottom, using multiple indicators for further confirmation.

For example, God Predictors considered a different approach in 2024 as the gold market broke the pivotal levels. Gold Predictor bought gold at lows and sent these trades to premium members via emails and WhatsApp in 2024. The first entry in 2024 for a swing trade was at $1996, with the price confirming the bottom when the trading signal was sent to members. During this period, many investors and traders expected prices to decline further. The second signal was to buy gold at $2155, which confirmed a bottom when the signal was delivered.

Similarly, the third swing trade signal was to buy gold at $2286.50, with the bottom identified at this level. These trade entries were based on thorough research, including technical analysis using cycles, Fibonacci levels, and RSI indicators. Traders may use these techniques to identify the bottom during this bull market in 2024. The same strategy was applied to day trades in 2024 to earn strong profits in gold trading.

Bottom line

Despite a recent pullback due to Fed rate cut expectations, gold's long-term outlook remains bullish. Weakening economic data, geopolitical tensions, and a potential Fed pivot all point towards higher prices. While short-term consolidation is possible, dips present buying opportunities, especially considering the historically weaker June performance compared to July. Traders should be cautious of volatility but can leverage technical analysis and seasonal trends to identify entry points and navigate market swings for long-term gains. The target for gold remains $3,000.

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