Digitex continues to deliver on its promise of adding more trading products to the Digitex Futures Exchange (DFE). The platform is now rapidly developing a more complete product portfolio which will allow users to trade on a zero-fee, state-of-the-art one-click ladder user interface. Today, we will examine two newest markets that will soon join Bitcoin, Ether, and XRP on the mainnet. These are gold and Amazon.
Gold has served as a store of value and medium of exchange dating back to 550 BC when King Croesus of Lydia ordered the issuance of the first gold coin. For the past 3,000 years, countries have been using gold as part of their national monetary system. In 1660, the British Government adopted a gold standard, which officially created a direct link between gold and the value of the British Pound. Other countries soon joined Great Britain in adopting a gold standard. Even though the gold standard was abolished by the United States in 1971, gold continues to be globally accepted as a valuable asset and highly regarded as a premier store of value.
Why has gold maintained its role as a highly valuable asset during the past 3,000 years? Because the supply is limited and the demand for the “yellow metal” has remained strong for centuries. Based on data provided by the World Gold Council, the total supply of above-ground gold is 6.97 billion ounces. At first glance, 7 billion ounces may seem like a huge supply. However, if we consider the fact that 7.8 billion people currently inhabit the earth, there is only one ounce of gold available per person. This explains why gold will always remain incredibly popular as a store of value.
In regard to investing in gold, there are several different ways for investors to own gold. The most popular method for investing in gold is to purchase physical gold in the form of bullion or coins. Typically, physical gold is purchased through bullion dealers or precious metals websites. In addition to physical gold, investors can own “paper gold” through an exchange-traded fund (ETF).
The most popular gold ETF is GLD, which was launched by State Street Global Advisors in November 2004. For those investors who prefer an added level of risk, the Commodity Exchange in New York introduced gold futures contracts in 1975. These contracts allow participants to leverage their investments while speculating on the future price direction of gold.
What type of gold investment is the Digitex Futures Exchange offering? Just like BTC, it’s a perpetual futures contract, which means there is no expiration date. Speculators can use the DFE’s state-of-the art trading platform for buying and selling perpetual gold futures contracts. Of course, the contract will be available on a commission-free basis. How many futures exchanges are providing their clients with a commission-free gold futures contract? The answer is, “zero.” DFE is the only exchange where traders can buy and sell gold futures without fees and commissions.
Long-Term Gold Forecast
Let’s examine the current trend of the gold market. We will review gold from a long-term perspective and a short-term perspective. In regard to the long-term trend, gold has been in a secular bull market since February 2001 (Chart #1).
Based on historical data, secular bull markets typically last 25 to 30 years. Therefore, the price of gold should continue to grind its way higher for the next 5 to 10 years. Of course, the market won’t advance in a straight line. There will be sharp declines along the way. However, the predominant trend will be bullish.
If gold is forecasted to move higher for the next decade, what type of price advance can we expect? Obviously, it’s impossible to accurately forecast the future price direction of any commodity. However, we can form an educated guess by using Fibonacci ratios. Prior to 2020, the all-time high for gold occurred in September 2011 @ 1923. The subsequent low was formed in December 2015 @ 1045. The range is $878 per ounce. Based on the Fibonacci ratio of 2.618, the forecasted top for gold is $4,222 per ounce (Chart #2).
Short-Term Gold Forecast
Gold appears to have formed a short-term top on August 7 @ 2081. During the past six weeks, the market has been locked in a trading range (Chart #3). The important numbers to watch are 1874.2 and 2024.6. A bearish breakout occurs @ 1874.2. A bullish breakout occurs at 2024.6. The recent price action would suggest that the next breakout will be to the downside.
Financial websites are filled with a wide variety of technical indicators in an attempt to help traders and investors analyze various speculative assets like gold. Unfortunately, many of these indicators perform rather poorly in terms of generating profitable trading signals. However, there are a few indicators that have historically provided reliable trading signals. The Money Flow Index (MFI) has proven to work quite well in the gold market. Of course, there is no such thing as a perfect indicator. Even the best indicators have losing streaks. MFI is no exception.
The Money Flow Index (MFI) is a momentum indicator that measures the inflow and outflow of money into a security over a specific period of time. It uses price and volume to calculate trading pressure. Arguably, MFI is the purest way to determine the amount of money entering and leaving a particular security or market.
Similar to RSI, the index fluctuates between 0 and 100. In terms of gold, the best way to apply MFI is to wait for extreme readings. For example, a reading below 25 would indicate a possible short-term bottom. Conversely, a reading above 75 would indicate a possible short-term top. Please review Chart #4. The green vertical lines are buy signals. The red vertical lines are sell signals. As you can see from the chart, MFI was very successful in forecasting the recent top on August 7.
MFI is a fairly common indicator located on most financial websites, particularly charting websites. If you are an active trader, you may want to consider adding MFI to your list of indicators.
When Jeff Bezos launched Amazon on July 16, 1995, he had absolutely no idea how successful his company would become. During the company’s first full year of operation in 1996, annual revenue was $15.7 million. In 2019, Amazon’s revenue was $280.5 billion. This represents an incredible increase of 1,786,524%.
Bezos was living a middle-class existence in New York when he officially founded Amazon in 1994. Today, 25 years later, Jeff Bezos is the wealthiest man on the planet. Arguably, Amazon is the most successful company to emerge from the internet mania of the 1990s.
Long-Term Amazon Forecast
Let’s examine the current trend of Amazon. We will review the stock from a long-term perspective and a short-term perspective. Please review Chart #5, which covers the first 10 years of Amazon’s trading history (1997 – 2007). Amazon begins its secular bull market with the final capitulation of the internet mania in October 2001 @ 5.51 per share.
Essentially, the price of Amazon has been moving continuously higher for the past 19 years. As we discussed during our gold conversation, secular bull markets typically last 25 to 30 years. Therefore, Amazon should reach a final top between 2026 and 2031. Based on Fibonacci ratios, the forecast for a final top is 5498.73 (Chart #6).
Short-Term Amazon Forecast
It appears that Amazon formed a short-term top on September 2 @ 3552.25. Currently, the chart pattern is neutral. However, the chart will turn bearish on a weekly close below 2630.08. In order to recapture the momentum, the bulls need a weekly close above 3488.41. Please review Chart #7.
In terms of short-term indicators, the Relative Strength Index (RSI) has worked quite well for Amazon over the years. A reading below 25 represents a buy signal. Sell signals are generated if the index moves above 75. Please review Chart #8.
This chart covers trading activity for the past 6 months. The red vertical lines depict RSI sell signals. The RSI indicator generated a perfect sell signal on September 2. Another impressive short-term sell signal was issued on July 10. You will notice that RSI has not produced any buy signals during the past six months. This is a testament to the underlying strength of Amazon.
Gold and Amazon Will Offer Excellent Trading Opportunities
Several of the world’s top traders consider gold to be the most tradeable market in terms of volatility, predictable chart patterns, repetitive cycles, and the ability to follow a trend for long periods of time. Of course, there is never an “easy” way to make money through stock and commodity speculation. However, some markets are more predictable than others. Gold is one of those markets.
Adam and the Digitex team made the right choice when they selected gold and Amazon for the next additions to the commission-free exchange. Historically, both these markets have offered exceptional trading opportunities. In terms of volatility, both markets are near the top of the list. Obviously, the “best news” is that Digitex provides its clients with a zero-fee trading experience. And don’t forget to check out the latest market to go live on the DFE mainnet – XRP/USD – Happy trading!
Digitex Futures writers and/or guest authors may or may not have a vested interest in the Digitex Futures project and/or other businesses mentioned throughout the site. None of the content on Digitex Futures is investment advice nor is it a replacement for advice from a certified financial planner.