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Why Isn't Gold Rallying? Here's How to Trade It Now

Gold prices should be rising amid the current turmoil and the Fed's rate cuts. Here's what the charts say investors should do now.

Investors have nowhere to hide amid the recent onslaught. In just a few weeks equities have tumbled into a bear market, while cryptocurrencies, gold and other assets have fallen as well.

About the only thing not under significant pressure is bonds, even though the iShares 20+ Treasury Bond ETF  (TLT)  is up just 2.8% this month. 

Admittedly, bonds are up more than 16% in 2020 to date, but they're still not offsetting the losses in the equity market (not that they necessarily should).

At the end of the day, that markets have left most investors in a world of pain. They appear to be forced to sell what they can, not necessarily what they want to. 

That’s being reflected in assets like bonds and gold, which are either struggling to rally or flat-out declining as volatility runs rampant.

When we see these types of volatility spikes, investors are forced to sell whatever they can get their hands on to raise capital and stem the bleeding. 

So what can we expect of gold prices, which should do well during times of panic and as the Fed cuts rates to zero?

Trading Gold Prices

Daily chart of gold prices. 

Daily chart of gold prices. 

Above is a daily look at physical gold prices, while some investors may prefer to trade the SPDR Gold Trust ETF  (GLD)

The disconnect between the two is slight, with veteran traders often preferring physical gold or gold futures to the GLD alternative.

In any regard, have a look at the recent performance above. After topping out near $1,700 an ounce, gold has come down rather quickly, now trading just above $1,500.

Risk-averse traders who want a piece of the gold action could consider a long position against the 200-day moving average. Below the 200-day, which comes into play just below $1,500, and a fall to $1,450 could be in the cards.

It’s not unreasonable, however, to expect some sort of rebound in the yellow metal, given the Fed’s latest decisions, as well as the concern around the globe right now. 

It’s not hard to find reports of investors struggling to find physical gold to buy from online retailers.

Should support hold - either at the 200-day moving average or $1,450 - look for a rebound higher. A move to the 100-day moving average would send gold to $1,536 an ounce, with the backside of prior uptrend support coming into play near $1,570. 

Above that and the 50-day moving average near $1,590 an ounce is on the table, with $1,600-plus in play above that.

The bottom line: This should be gold’s moment to shine, and right now it’s lost a lot of luster. With proper risk management, investors can try for a rebound in gold without taking on too much risk.