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Gold Price Struggles as Risk Assets Begin to Shine, Trading Range Tightens

Gold Price Struggles as Risk Assets Begin to Shine, Trading Range Tightens

Nick Cawley, Senior Strategist
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Gold Price (XAUUSD) Analysis, Price and Chart

  • A short-term, risk-on move weighs on the price of gold.
  • Gold will remain underpinned as bullish pennant pattern unfolds.
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Gold Looking To Break a Restrictive Range

The price of gold is currently fading lower as markets turn their attention to riskier asset classes. Global equities have picked up a bid as central banks around the world continue to offer ultra-cheap money in a bid to stave off the economic devastation caused by the coronavirus. Positive sentiment is also being aided by countries either unwinding recent lockdown rules or at least discussing ways of getting the population back to work and re-booting their economies. The US is set to borrow USD3 trillion from the markets between April and June this year to support the US economy, an unprecedented amount when compared to the $1.3 trillion borrowed in all of 2019.

The recent risk-on/risk-off swings have produced a pattern of higher lows and lower highs over the last month, tightening gold’s trading range. A basic bullish pennant formation continues to be formed which normally suggests a top-side breakout is being setup as the asset class consolidates. This formation may attract gold bulls at the lower trendline, currently around $1,677/oz. if the pattern continues to play out. The price of gold is being kept in check by the 20-day moving average which needs to be broken to allow further upside. The downtrend line off the April 14 multi-year high also remains firmly in-place and a breakout is looking increasingly likely.

If gold breaks higher, then $1,723/oz. and $1,740/oz. stand in the way of the $1,747/oz. high, while a break lower will see recent lows at $1,670/oz. and $1,659/oz come into play before stronger support between $1,640/oz. and $1,645/oz.

How to Trade Gold: Top Gold Trading Strategies and Tips

Gold Daily Price Chart (August 2019 – May 5, 2020)

Gold chart showing a bullish pennant pattern
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What is your view on Gold – are you bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.