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RISK-REWARD PALATABILTY POINTS TO THE DOWNSIDE FOR GOLD…. (TRADE OF THE DAY)

If you have followed our outlook on Gold for the year, you would have realized that since June we have been overall bullish given the combination of heightened global markets risks and a Federal Reserve that looking to be quite dovish for the remainder of the year. We have already hit our first two target – $1500 and $1550 for 2019 within three months since we published our medium term bullish stance.

Nevertheless, we are tilting to a short-term bearishness on the yellow-metal as we see risk-reward palatability favouring a correctional downside move – traders can look to short price employing effective risk management strategy (that is basically keeping the risk tight given that underlying direction is still immensely bullish) [see H1 Chart].

Fig 1: Hourly (H1) Gold Chart

Gold/XAUUSD Sell @ current market price (instant execution) Stop: 1560 Limit: 1500 Alternatively, this is a contrarian play and is largely based on risk-reward palatability – basically we would be ‘surfing against the wave’ highlighting that risk here is materially high; hence it’s mandatorily advised that traders employ a stop-loss mechanism. Also, there is the NFP (August) report due tomorrow, depending of the data print, market participants might look to front-run the Fed ahead of the September interest rate decision thus driving significant volatility with the possibility of nullifying the aforementioned outlook.

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