Important levels to watch, as well as gaps and scenarios for the future.
In today’s gold price forecast, I decided to share with you my insights from Monday’s Quick Gold Alert. Have a nice read!
Technical Picture of Gold
Let’s start today’s Quick Gold Alert by quoting Wednesday’s edition:
(…) What could be the pro-bullish scenario?
(…) if we consider today’s rebound from the upper border of the green rising channel as a verification of the earlier breakout, we could see an increase even to $2,542.80, where the size of the upward move would correspond to the height of the green channel.
And speaking about the channel… when we take a look at the daily chart, we can see that before the bulls can reach that such high levels, they will have to face one more resistance - the upper border of the short-term orange channel, which is currently at around $2,536.21.
Nevertheless, considering the current position of the 4-hour indicators (which require caution in making decisions at these levels) someone may ask at this point about the pro-bearish scenario.
In my opinion, the pro-declining scenario can be considered only when the bears manage to close yesterday's price gap (in other words, close the day under $2,504), invalidate the breakout above the barrier of $2,500 (closing the day below it) and end the day below the lower border of the pink consolidation, the lower line of the black channel (marked with dashed lines on the 4-hour chart) and the upper border of the green channel, negating the pro-growth scenario described above.
In this case, the first target for the sellers would likely be the green gap ($2,463.30-$2,467.30) from Aug.9. (…)
From today’s point of view, we see that the overall situation developed in line with all previous assumptions, but let's start from the beginning and analyze what exactly happened on the chart since the last alert.
As you see on the 4-hour chart, although the bulls managed to push the futures slightly above the upper border of the pink consolidation on Wednesday, this improvement was very temporary, and they didn’t manage to hold gained levels.
The proximity to the early Aug. peak and the above-mentioned position of the 4-hour indicators lured the bears to the trading floor, which translated into a reversal, which invalidated the earlier tiny breakout above the mentioned consolidation.
This negative development triggered further deterioration and the breakdown under the lower line of the formation. Thanks to this price action gold futures also dived under the lower line of the black channel (marked with dashed lines on the 4-hour chart) and the upper border of the green channel, negating the pro-growth scenario and activating the pro-declining scenario.
What happened next?
Although the bulls tried to come back to earlier prices on Thursday, they failed, which resulted in another downswing that took the price to an intraday low of $2,469.35.
In this way, gold futures approached the first downside target for the sellers described on Wednesday but didn’t even manage to test it as the above-mentioned green gap ($2,463.30-$2,467.30) from Aug.9 encouraged the bulls to fight once again.
At this point, it is also worth noting that when we take a closer look at the 4-hour chart, we can see that thanks to this downswing, the futures also tested the 38.2% Fibonacci retracement (marked with green), which gave the buyers an additional reason to act.
As a result, gold futures bounced off the first support area and started a consolidation (marked with orange on the 4-hour chart) slightly above it, which ended on Friday.
As you see, the bulls gathered enough strength to attack once again not only the previously broken upper border of the green rising trend channel but also the early August peak.
Thanks to their run, the futures successfully broke above these levels, opening the way to the upside targets described on Wednesday, which together created the first potential resistance area marked with the orange ellipse (with number 1).
As a result, gold futures hit a fresh all-time high of $2,548.10 and closed the day at the highest level in history, realizing the pro-bullish scenario from Wednesday.
What impact did this positive development have on today’s trading?
Gold futures started Monday with another quite small pro-growth gap ($2,537.80-$2,547.40), which caused further improvement and resulted in another fresh peak at $2,548.40 in the first trading hour.
Will we see further improvement?
Looking at the above charts, we must consider (…) the proximity to the next resistance zone created by the level of $2,550 (which may be treated by some market participants as a kind of psychological barrier) and the 127.2% Fibonacci extension (at around $2,555) based on the entire early Aug. downward move (marked with red)
(…) the above suggests that even if the bulls try to push the price higher (and test the above-mentioned next resistance zone), another corrective move is likely just around the corner.
Nevertheless, please keep in mind that such bearish price action will be more likely and reliable only if the sellers manage to close today’s green gap.
Such negative development could translate into a slide to the previously broken upper border of the green rising trend channel (currently at around $2,524), which is slightly above the early Aug. peak ($2,522.30). In other words, together thy create the first support area, which may have a decisive influence on the future fate of the gold futures price!
What does it mean?
In my opinion, if it withstands the selling pressure, another attempt to move higher will be likely and we’ll probably see another attack on the above-mentioned resistance zone (marked with the orange ellipse with 2 on the 4-hour chart) and the upper border of the orange rising trend channel marked on the daily chart.
Summing up, gold futures extended gains and hit a fresh all time high of $2,548.4 after the creation of the next pro-growth gap. Despite this improvement, the combination of the all the mentioned technical factors suggests that the space for further gains may be limited and correction of the recent increases may be just around the corner. Therefore, in my opinion, high caution is highly recommended when making investment decisions at these levels.
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Anna Radomska