Over the past few days, gold has set a series of records after surpassing $2.000 last weekends. In contrast, the US dollar is at a 27-month low, which further strengthens the uptrend of precious metals.
As a rule, the yellow metal is a popular safe-haven asset for retail traders, and now, with this historical record, gold is gaining attention and will shine even more. But we cannot help to worry about a bubble burst scenario, which increases the risk of a pullback in the market as the stock is also near a record high after Covid-19 broke out in mid-March.
In general, the picture we are seeing is similar to a spring being compressed more tightly than ever, with the ability to bounce back to its original state at any time and that would be costly. Who are depending on it. Of course, we can't make an accurate forecast of a market going to crash somehow, but we are betting on a security falling.
Admit that we were wrong about some previous forecasts that the price of gold or stocks will drop rapidly. However, we believe traders can avoid the great risk of betting it all on the precious metal commodity or stock market with another haven asset.
But with gold seemingly headed for the stratosphere, buying it now can be like getting on a train when it gets closer to the last station, with no seats left and not much distance to cover. Today we will come up with an alternative that is Bitcoin. Naturally, traders could make this investment simply as Bitcoin completed a reversal against the dollar, as seen below:
BTC/USD Weekly
While such transactions have a higher potential reward if the dollar continues to fall, as the greenback continues to fall below its two-year lows, the risk of a pullback increases, as well. Increases commercial risks.
So we are offering a more subtle transaction: buying Bitcoin while shorting gold.
BTC/XAU Weekly
Although Bitcoin has completed the bottom of the weekly head and shoulders pattern, the BTC/XAU pair has not. The trend line of this currency pair since its June 2019 high - initially resistance - has turned into support as the BTC/XAU breakout.
Both the MACD and the RSI are peaking, suggesting the price will complete the pattern. Currently, Bitcoin transactions can be more risky, as the price has yet to make a breakout to the uptrend, and BTC / USD could fall back on the scene if buyers “turn back”. .
Trading strategies
Conservative traders will wait for the real breakout before risking a long position. Wait for entry and best to close above 7.0000 and identify the bottom of the H&S pattern. A then waits for a probable short-term correction after a breakout, to re-check the security of the trade.
Prudent traders should also wait for a breakout, possibly content with a breakout beyond February 10 high at 6.71. Then they should also wait for a move back for a better entry, if not retesting support.
Active traders can risk a long position before breaking out, knowing and accepting the risks. And managing the risks is also important to this trade.
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