August 2024 Market Madness: Gold Soars, Equity Prices Crash - What's Next?

August 2024 has been unpredictable, with global equities in freefall and gold reaching new heights. On August 16, gold hit $2,500 for the first time, but should you chase this rally? Stay tuned for the technical outlooks and insights into this volatile market!

Creators：Daniel Ang

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Good afternoon. Today is Saturday, August 17,2024. So far,the month of August has been a little bit crazy. At the beginning of the month we have a near meltdown in equity prices globally. And now on Friday itself, August 16, we can see that gold prices traded to an all time high. My opinion is that be very careful chasing this gold ever higher because come next week there is a real risk that the gold prices may come under selling pressure, at least in my opinion. Later on I'll be showing you my technical outlooks.

So just be aware that personally I believe this gold rally may not be sustainable, at least in the near term.

As you can see on this slide. Here, the report by Bloomberg on Friday. Dated August 16,2024. The headline is saying that gold tops $2,500 for the first time on outlook for lower rates. As we can see, market has been expecting a September rate cut Federal Reserve and this theoretically should actually cause the dollar to ease off. And in the correlation between us dollars and precious metals, we can see if the dollar eases off, that should actually result in a rise in gold prices, which is what we are seeing here. So the report here attribute Friday's gold rally to the expected rate cut by the Federal Reserve in September. So just be very careful because this is the headline, it says nothing else about other catalysts. So we want to take this with a pinch of salt here.

And when we look at the technical outlook here, we can see that this is the weekly timeframe for the Comex December2024 micro gold futures. The contract specs says that the product code is MGC for referring to the December contract here. And this is the weekly timeframe like I mentioned earlier on. And we can see the rise from $1,045 as far back as November 2015 is unfolding in a somewhat three wave rally. And if this is the case, a three wave rally usually suggests it's a corrective pattern here. And based on this three wave pattern here, the upside potential for these gold prices basis, the December contract is anywhere between two thousand six hundred sixty two dollars forty cents to two thousand nine hundred eight dollars eighty cents. Obviously, when we compare these prices to Friday's settlement price of $2,537.80, it does suggest that we have some more upside potential here, in excess of $100 per ounce. So this is the weekly timeframe.

But when we look into the daily timeframe, it does not look like there is going to be a lot, a lot of potential here. Meaning to say that whether this market has enough momentum to go all the way into this equality target here, which I just mentioned earlier on about $2,662.40 being conservative. And you can see that on a relative basis, it does not give us a lot of room to move to the upside. Although in the near term there could be some pressure for gold prices to extend higher. Now, when we include in a technical indicator like the stochastic, which is a momentum indicator, we realize very quickly that the most recent stochastics, based on the daily timeframe is showing us that this area here does not seem to see any kind of continuation pattern here. In fact, there is a risk of a divergent. This refers to the stochastic highs are getting lower and lower as the price of gold gets higher and higher. So we have higher highs in the price action, but we have lower highs in the indicator as far as the stochastic is concerned.

Now, when we compare this to another indicator called the ADX, and in the ADX, especially during this period, from the beginning of this year itself, all the way to middle of this year, you can see that the market has actually rallied. And this is accompanied by a rise in the ADX, which is normal. But once we see that the price has been going into all time high and the indicator is not necessarily in a trending mode. So this suggests to me that the market upside here may not be sustainable, at least not in the long term.

So be very, very careful chasing this market ever higher.This coming week we could see higher prices in terms of follow through buying in Asia and London. But again, the key here will be how it closes at the end of next week. So if the market open highs and close low by the end of next week, then that could be a sign that the market may not be sustainable. So be very, very careful chasing this market ever higher, although near term there is the possibility of an extended rally. But like I said, when I look at this longer term outlook, it does give me cause for worry.

And when you have a view of this particular gold market, you can use the comex micro gold futures to actually participate in this outlook here. Now, like I say, the product code here is MGC and the contract size here is one 10th the size of a regular Comex gold futures contract at ten troy ounce. And the minimum price fluctuation is ten cents per ounce.

And the trading hours is from Monday to Saturday morning Singapore.

Watch the full video to learn more.

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