Gold Price Talking Points:
- Gold prices has been bid throughout the month of June, gaining as much as $83 over the past three weeks.
- While the move was initially synced with a sell-off in the US Dollar, a recent topside push in USD has been of little hindrance to the bullish theme in Gold.
- Gold bulls have pushed prices back to a key zone of resistance that was previously dubbed ‘the danger zone.’ With FOMC on the docket for tomorrow, can bulls drive the bid until a fresh five-year-high comes into play?
- Tomorrow’s FOMC appears to carry the wide expectation for the bank to be not-as-dovish as markets have come to expect, and this may keep Gold prices subdued near-term. But – the weekend after next brings G20, might this be the catalyst that Gold bulls are looking for?
Gold Price Gears Up for Another Shot at Breakout
The game is on, and Gold bulls may have finally met their match, at least for now, as taken from a long-term zone of resistance that’s held the highs in the yellow metal for the past five years.
As looked at coming into last month, Gold prices were gearing up for a breakout. This comes after three months of digestion following a strong topside move that began in August of last year. And as gold prices firmed from support around the 1160 level, buyers retained control all the way into mid-February, helping to produce a swing high at 1346.75. The next three months brought consolidation, with support eventually setting-in from the 38.2% Fibonacci retracement of that major move.
And as looked at a few weeks ago, Gold prices appeared to be getting closer to that breakout as buyers continued to cauterize support around this key level on the chart, taken from around the 1275.55 price that helped to hold the lows for more than a month on the weekly look in Gold.
Gold Price Weekly Chart
Chart prepared by James Stanley
The Big Picture Behind Gold Prices – Is Now the Right Time?
Taking a further step back on the Gold market, and a long-term zone of resistance sits overhead. This is an area of prices that’s rebuked multiple topside advances over the past half-decade, and many of those instances happened with a backdrop resembling our current scenario: A one-sided move sees Gold prices catapult to resistance; only to fall flat as Gold prices trickle-lower whilst staying in the longer-term range.
And while this time may very well turn out to be different, betting on such, particularly as Gold prices are so extended from nearby supports, appears to be a question of prudence.
Taking a further step back to the Monthly chart and the importance of this resistance zone becomes a bit more clear. The bearish trend-line making up this longer-term symmetrical wedge pattern remains in-play this morning, helping to set today’s resistance in Gold prices.
Gold Price Monthly Chart
Chart prepared by James Stanley
Gold Price Strategy Moving Forward
As discussed last Friday, this can be a difficult spot if looking to line-up bullish exposure on Gold prices. An FOMC rate decision set to announce tomorrow will likely keep the yellow-metal on the move; but given context, it can be difficult to justify the risk outlay necessary to jump in on the long side.
Given the current posturing below resistance that’s been showing in Gold price action, and traders have a couple of options for moving forward. Topside breakout potential could still remain, although this would be an approach likely reserved for the more aggressive Gold bulls. The area for staging this topside breakout approach can be either aggressive, focusing in on last week’s high around 1358.30; or a bit more conservative, looking for the five-year high to first get taken-out around the 1375 level.
Alternatively, a pullback to support may be a more amenable way of operating with a continued bullish backdrop in Gold. I had looked at two levels last Friday, neither of which has yet come into play; but given the drivers on the headlines in the coming days, the potential for a large pullback remains, and this would carry with it the potential for better proximity to nearby support to allow for topside strategies. The same 1319 and 1302 levels remain of interest, with the latter of those prices also functioning as the mid-May swing-high. A break back-below 1300 would mark a clear change-of-pace, and at that point, the bullish stance would come in question and traders would likely want to re-evaluate further topside potential.
Gold Price Daily Chart
Chart prepared by James Stanley
To read more:
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--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
