Gold Price Forecast: XAU/USD Goes for $2,000 Breakout


Gold talking points:

  • Gold is starting Q2 with a show of strength, trading above the vaulted psychological level of $2,000/oz.
  • Gold has shown an increasing frequency of resistance tests at the 2k level, with a short-term ascending triangle formation building on the four-hour chart looked at below.

Gold prices closed the first quarter of this year just below the $2,000/oz level, which has become somewhat of a sticking point in gold price action of late. This isn’t the first time that the 2k level has been a factor in gold markets as we’ve seen the yellow metal test that price last year, which was the first such test since it’s initial appearance into the equation in the summer of 2020.

In the summer of 2020, it was the bazooka of stimulus that the Fed was trotting out that helped gold prices to test above that level in early-August. There was but one weekly close above that level, which was the week after the 2k level first started to get tested. And the weekly bar that did close above that price printed the same week that gold had set a fresh all-time-high, after which prices quickly pulled back until support finally showed up in March of 2021.

The test last year took place right around the time that Russia invaded Ukraine and similarly, a strong bullish push propelled gold prices above the $2,000/oz level and buyers couldn’t hold the move. And, again, that failure to hold above the 2k level resulted in a pullback below the $1,700/oz mark.

For this iteration, the strength that began to show around the banking worries in the United States has continued to drive – and gold prices tested the $2,000 oz mark as resistance for each of the past two weeks. Bulls are pressing again to start the week, with prices making a fast push up towards the yearly high of $2,015.

Gold Weekly Price Chart

Chart prepared by James Stanley, Gold on Tradingview

Gold Loading Up

Gold prices began to re-test the 2k level two weeks ago, with buyers making a fast push to start the week. A pullback showed up shortly after that and by the end of the week prices were already back to the 2k handle, which led to yet another pullback.

By the end of last week, however, buyers had pushed up for another test and at that point, there was a build of higher lows indicating a diminishing marginal impact of that resistance zone. This makes for an ascending triangle formation, which is often approached with the aim of bullish breakouts.

Gold prices are testing that breakout right now, with the 2006 swing-high inside of the 2015 level that marks the current yearly high in the yellow metal.

Gold Four-Hour Price Chart

Chart prepared by James Stanley, Gold on Tradingview

Gold Big Picture

While the short-term chart contains bullish potential based on the ascending triangle formation, the longer-term backdrop is a bit more questionable; namely in terms of bulls’ ability to hold the breakout. As mentioned at the beginning of this article, there’s been but once weekly close above the 2k level – and never a monthly close above that price.

If we review how gold behaved when the 1k level was coming into play back in 2008, there was a similar game of cat-and-mouse as there were two daily closes above that level before a 34% pullback showed up during the financial collapse.

It wasn’t until the Fed turned on the bazooka of stimulus that gold was able to finally mount above the $1,000 psychological level and leave it behind. And even then, there was quite the struggle at the 1k level, after the failed test in February of 2009, which led to the eventual breakout in October of 2009.

Gold Daily Chart (2008 – 2010)

Chart prepared by James Stanley, Gold on Tradingview

Gold Long-Term

Taking a step back to the weekly chart of gold highlights a range with resistance around that same 2k marker. Each of the past two interactions of tests above 2k have led to pullbacks of at least $400, with the most recent test finding support at the 50% Fibonacci retracement of the 2018-2020 major move.

Ranges do break – and usually there’s a reason for it. And in this case, that reason would likely have something to do with the Fed taking a step back from rate hikes and, such as we saw in 2009, making a dovish move that can help gold bulls to get more familiar with pricing above the $2,000/oz level, similar to what happened around the $1,000/oz marker. The main issue for right now is that we don’t yet have that evidence from the FOMC.

A level like 2k can take some time to leave behind, and perhaps we are there; but for the range to give way for good we’re likely going to need some element of confirmation from the Fed that looser policy options are on the table. As we’re seeing in rates markets at the moment, markets are gearing up for cuts that the Fed has so far denied are in their plans. This is where the action is on gold prices at the moment, along with a number of other markets as market participants appear to be trying to get ahead of a softening in Fed policy that hasn’t been cemented yet.

Gold Weekly Price Chart

Chart prepared by James Stanley, Gold on Tradingview

— written by James Stanley, Senior Strategist


Source link

Post Author: admin

Leave a Reply

Your email address will not be published. Required fields are marked *