Gold: is the gold rush over?

Gold, one of the best performers during the coron situation, seems to have taken a turn recently as US indices continue to recover. Technical analysis suggests that the recent bullish trend may be at risk, after markets have gone through a series of higher highs and lows.

Although it has been trading in a bearish tone throughout the week, as U.S. stocks have risen, it is still too early to tell if this trend will continue in the coming weeks.

What's happening with Gold?

The onset of the corona situation has left bulls interested in gold puzzled - the price of gold has fallen, not risen, as the general consensus has indicated. What traders had not anticipated was the shortage of dollars in the financial system. It turned out that investors were looking for safety in the USD, not in Gold.

Gold has long been considered a safe haven. Investors of all ages keep a portion of their accounts invested in gold to hedge mainly against inflation. In times of crisis, gold tends to recover and the small portion of the account invested in gold tends to offset the risk sentiment that prevails in traditional markets.

As a result, the initial decline in gold scared investors - it occurred just as the Dow Jones fell below 19,500, making even long-term investors wonder when it would bottom. But then the Fed came to the rescue. It announced the opening of several dollar trading lines in a coordinated effort with other central banks around the world.

Gold triggered this announcement. And it didn't look back until it reached a new high.

What will happen next?

Since then, it has only posted a new marginal high, with little or no follow-up. Moreover, a close examination of the price movements around the recent peak reveals a triangle figure that acted as a reversal pattern. Is this a double vertex around 1739?

The triangle did indeed break further down, allowing the bears to hope that a vertex was in place. For traders riding on an eventual downtrend, gold needs to retrace a bit more before declaring victory - a break in the series of the highest lows is necessary. Bulls, on the other hand, should fear the awful combination of a possible double vertex and a triangle as a reversal pattern.

Gold has recovered since mid-2019. The uptrend started at $1,134 with little or no pullback. The corona situation this year should have sent the price of gold much higher, given the stock market carnage last month.

Yet gold only reached a new marginal high. Is it time for the bears to claim victory?