Gold Price Technical Forecast: Bullish
- It was a big week for Gold prices as the yellow metal broke out to fresh two-month-highs.
- The big question is whether the big-picture bullish trend is coming back into order after a near nine-month-pullback.
- USD weakness assisted with the move as USD bears re-emerged in a big way this week.
Gold prices may finally be getting back in order for that bigger-picture bullish trend, and it’s taken a while for that to be the case. In the aftermath of the pandemic policies implemented in March of last year, Gold prices fired higher to set a fresh all-time-high on August 7th of 2020. I had even looked at the setup in this very same weekly technical forecast, at which point I highlighted a bearish engulfing pattern that started to set up the scenario for a pull back.
But that pullback didn’t really stop, and, well, it still hasn’t, as prices remain more than 10% off of that all-time-high nine months later. Along the way, massive rallies developed in cryptocurrencies and meme stocks as investors looked for more and more ways to employ their capital. And, in an environment of negative real rates, that makes sense. But, Gold didn’t get much love as Gold prices merely scaled-lower in a bearish channel, finally finding some element of support in early-March.
To learn more about the bearish engulfing formation that showed ahead of this pullback, check out DailyFX Education
Gold Weekly Price Chart: Nine Months After the ATH
Chart prepared by James Stanley; Gold on Tradingview
Gold Starts to Set Support
Even into mid-March trade, the upside of Gold did not appear as positive. Perhaps more disconcerting for Gold bulls, other markets were going ballistic with volatility, with markets like Bitcoin and Ethereum seeing wild advances. Even Dogecoin, a cryptocurrency started as a joke, have seen massive price inclines while Gold has been relatively unloved.
But, a couple of things started to happen in late-March. Gold prices ran into a trendline connecting May 2019 and March 2020 swing-lows. And that inflection was actually the second at the same spot of support, setting up for a double bottom formation that I had shared shortly after it had shown.
What makes this exciting is that double bottom formations are often followed with the aim of bullish reversals. So, we had an approximate 38.2% of the 2018-2020 major move, combined with a trendline inflection, and the build of a bullish reversal formation. For the double bottom to confirm, we’d merely need to see prices break-out above the neckline, and that happened in mid-April. There was even a check-back to support at prior neckline resistance from the formation, as I had shared earlier this week.
To learn more about the double bottom formation, check out DailyFX Education
Gold Daily Price Chart
Chart prepared by James Stanley; Gold on Tradingview
Gold Technical Forecast: Bull Flag Break In the Cards?
At this point, the excitement behind Gold prices is that we finally have some element of alignment between short and longer-term trends. The bull flag formation looked at above is generally a correction within a longer-term bullish trend.
And if we look at drivers for this week, it fits. The Fed is going to stay heavy on the accommodation until either something breaks or the US is putting up legitimate growth numbers in terms of employment and wage inflation. Those will likely have to wait, as current pandemic policy has enhanced unemployment benefits that aren’t going to come into question for a few more months, at least. This can help to keep pressure on the US Dollar as investors continue to look for ways to avoid negative real rates, since it doesn’t seem as though the Fed will be hiking anytime soon.
For Gold prices – this puts emphasis on the next zone of resistance around the 1860 level, where next week the resistance side of that channel making up the bull flag will become confluent with the 23.6% Fibonacci retracement of the 2018-2020 major move.
For support, which may come into play early in the week as longs look to take profits after a really fast jump, look to the 1797-1800 area level which showed a few different iterations of resistance on the way up but, as yet, hasn’t been tested for support since prices have broken through.
Gold Four-Hour Price Chart
Chart prepared by James Stanley; Gold on Tradingview
--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
