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Gold Price Technical Outlook:

  • Gold price rally could soon face stiff opposition
  • Sentiment extreme suggests exhaustion stage

For an intermediate-term fundamental and technical viewpoint, see the Q3 Gold Forecast.

Gold price rally could soon face stiff opposition

The rally out of the big-picture wedge has been legit, with gold pushing higher as one might expect after a multi-year breakout. But that doesn’t mean there won’t be a few bumps along the way towards even higher prices from here.

Not far ahead are a series of troughs created during the topping process in 2011-12. On an initial drive into these big swing lows there is likely to be at least some push-back, if not one that could put a sizable dent in the current rally; something we will need to have to address as things play out. The resistance zone runs from around 1522 up to 1575 when looking at weekly lows and closes during that period.

Adding further weight to resistance is the fact that the market participants are getting ahead of themselves. Per the Daily Sentiment Index (DSI), a futures market sentiment gauge, on Wednesday it showed 97% of the market as being bullish on bullion – indeed a rare reading of optimism.

The combo of strong resistance and an overly bullish market makes for a compelling reason to expect a peak of some type to form here shortly. A sudden turnabout in momentum from the 1522/1575 zone would off a good cue that such a top has formed, and a corrective move is getting underway.

From a tactical standpoint, longs could look to lighten up or tighten up trailing stops while aggressive would-be shorts may get a crack at a counter-trend trade soon. Broadly speaking, though, the target still remains near 1700 or better based on the size of the long-term wedge formation.

Gold Price Weekly Chart (2011-12 levels)

Gold Price Rally May Soon Find Opposition at Long-term Levels

Gold Price Chart by Tradingview

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 Daily Chart (watch for a sharp turnabout)

Gold Price Rally May Soon Find Opposition at Long-term Levels

Gold Price Chart by Tradingview

Resources for Forex & CFD Traders

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX