Gold Price 1Q 2021 Technical Forecast: The Correction May Be Over Soon
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Gold Price Technical Outlook:
- Corrective period may soon be over
- Bull-flag building around long-term support
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The final three month frame of 2020 brought with it weakness, an outlook we had going into Q4. The general nature of the decline looked corrective within the context of a longer-term uptrend as buyers stepped in routinely and prevented the metal from selling off too aggressively.
It was interesting to see gold decline with the dollar, but the correlation between the two is far from perfect and from time-to-time the two will trade in tandem. However, the correlation is likely to revert back into negative territory at some point soon, and if the outlook for gold stands to be longer-term bullish then it may mean more dollar weakness lies ahead.
But leaving any USD outlook aside and looking at gold in its own technical vacuum, the three lower highs following the 2011 peak along with the 200-day (40-week) moving average look poised to keep a floor in to start 2021. The choppy downward price action last quarter brings in the possibility of a bull-flag.
If one does fully develop, then watch the upper parallel of the bull-flag, as a breaking of that line will be the technical trigger that confirms the pattern. Given it has been developing over the course of months, a move out of it could potentially be a big one, and likely begin before Q1 is over.
Gold Weekly Chart (holding 2011/12 levels, 40-wk MA)
Gold Daily Chart (Bull-flag developing)
Gold Price Charts by TradingView
---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.