Trade of the week
Short gold
We propose a short position on gold, setting a stop-loss above the mid-June high of $3452 and targeting a downside between $3270 and $3250.
(AI video summary)
Current trade overview: short gold
As risk-on sentiment due to September Federal Reserve (Fed) interest rate cut expectations pushes the spot gold price lower we would like to go short gold.
Trade setup
- Entry point: consider entering on a minor bounce between $3000 and $3375
- Stop loss: range between $3410 and $3452 depending on risk tolerance
- Target: estimated downside target around $3270
- Risk-reward ratio: greater than one
Market context
Gold has recently shown signs of decline as risk-on sentiment bolsters United States (US) stock indices, including the US 500 (S&P 500) and the US Tech 100 (Nasdaq), to all-time highs. This positive market sentiment has reversed prior flight-to-quality flows into gold, leading to outflows that are expected to drive the gold price lower.
Historical resistance at the $3400 level has consistently capped gains, supporting this outlook. As such, the ongoing scenarios present potential opportunities for shorting gold within the outlined trade setup.
Cautionary note: while this trade presents a structured opportunity, market conditions can change rapidly. Traders are advised to consider their risk tolerance and market outlook before engaging in this trade.
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