Gold Price Technical Outlook:
- Gold price exploded out of multi-year wedge, big-picture bullish
- Price may correct near-term, but will do it some good
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Gold price exploded out of multi-year wedge, big-picture bullish
At last, after several years of gold price building a wedge a breakout finally developed. Last week’s strong weekly close outside of the pattern and above 1375 counts as a worthy breakout signal.
The height of the pattern provides a measured move target (MMT) of over $300 higher from the point of breakout, or a rally to the high $1600s. This will take some time of course, but as long as we don’t see a decline back inside the wedge and below last week’s low at 1333, the big-picture outlook is bright for gold.
More immediately, though, gold’s roughly 10% rise could use a little horizontal work before continuing on from here. Even if we were to see a thorough testing of the breakout area down in the 1360s or even as low as the 1340s, it wouldn’t be overly alarming. Breakout retest are a common occurrence.
A gradual pullback to sideways (‘bull-flag-like’ behavior) would be most ideal, demonstrating that buyers still have plenty of appetite despite the near vertical rise that has developed in recent weeks. But again, regardless of how clean the price action is, as long as gold doesn’t melt back inside the wedge the breakout should be respected.
From a tactical standpoint, longs with good pricing and a longer-term outlook may want to sit tight, while would-be buyers may be best served being patient and waiting to see how any retracement that may develop, unfolds. Prior to last week’s surge I was stilling giving shorts a chance at the top of the wedge, but that bias has been quashed for the foreseeable future.
Check out the IG Client Sentiment page to see how changes in trader positioning can help signal the next price move in gold and other major markets and currencies.
Gold Price Weekly Chart (strong wedge-break)
Gold Price Daily Chart (could use a correction)
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
