News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Gold Price Outlook Pulls Back After Failed Break Out Attempt

Gold Price Outlook Pulls Back After Failed Break Out Attempt

Peter Hanks, Strategist

Gold Price Forecast:

  • Gold prices had coiled into a falling wedge pattern but a failed break has muddied the outlook
  • As a result, the precious metal may continue to consolidate, remaining vulnerable to further losses
  • Still, the longer-term fundamental outlook for the commodity remains encouraging

Gold Price Outlook Pulls Back After Failed Break Out Attempt

Gold looked primed for a topside break out last week as it coiled into a falling wedge formation. The pattern was marked by a descending trendline to the topside, derived from the August high, and a trendline on the lower end around the $1,850 mark. Typically viewed as a bullish continuation pattern, the falling wedge seemed to provide an ideal springboard for a topside break until resistance near $1,920 stopped the move in its tracks.

Gold (XAU/USD) Price Chart: 4 – Hour Time Frame (July 2020 - October 2020)

gold price chart

Now, gold has pulled back even further, falling to the descending trendline that previously served as resistance but has since transitioned to a more supportive role. Evidently, a bullish resolution to the falling wedge pattern failed to materialize and gold may be vulnerable to further losses and consolidation as a consequence. That being said, the commodity should have a few levels to work with.

First and foremost is the descending trendline from August followed by potential support around the $1,850 mark. Tertiary support, and perhaps the most important from a longer-term perspective, resides around $1,800. To that end, the longer-term outlook for gold remains constructive despite the failed break higher. Monetary policy remains accommodative, stimulus seems to be a matter of when, not if, and bouts of risk aversion could give rise to safe haven demand.

Suffice it to say, it seems gold is still in a position of strength but lacks the required catalysts to charge higher. Therefore, I would argue further consolidation – perhaps between the $1,920 and $1,850 levels – is likely. Should the barriers on either side give way, it would materially change the shorter-term technical outlook and might allow for a quick continuation in the direction of such a break. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.

--Written by Peter Hanks, Strategist for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

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

DISCLOSURES