Gold Price Forecast: Gold Breakdown Pivots Back for Resistance Test

The price of gold has gained more than 15% in the last month and is running higher by about 2% over the last week. With this move, gold makes its way back into its upper Bollinger band after being under pressure for much of the year. Gold bulls will be watching closely for signs that this breakout will continue as prices close out an important period for bullion investors.

Gold closed the week above’ 1300, which keeps risk for additional gains as price extends its rebound from the September/November lows.

Gold closed the week above’ 1300, which keeps risk for additional gains as price extends its rebound from the September/November lows.

Gold is up 3.3% this week, 5.6% this month and 12% this year (on a YTD basis). It’s also up 18% since July and 23% since January (on an annualized basis). And based on these numbers alone—and considering that gold has held up well against other major currencies over recent weeks—it would seem prudent to consider buying some bullion at current levels if you’re looking to add precious metals exposure to your portfolio or just want some diversification away from stocks or bonds as a way of hedging risk while keeping things passive in nature at least until we get closer to “normal” again once markets settle down after Brexit happens on March 29th.”

An ascending wedge formation is nearing completion and suggests a bearish resolution before year-end.

The formation is a bearish sign, as it implies that the price has reached higher resistance and will now break down. It suggests that the bull market has ended and investors should prepare for a return to lower prices.

A bullish signal would be if gold broke out of this consolidation, which would signal its imminent ascent to new highs. This could occur as soon as next week or so (depending on whether there are any intervening rallies). If gold does not break through here, then it may still test support at $1,250 per ounce before moving back into its previous range around $1,200 per ounce—but only time will tell whether this occurs or not!

A breakdown below 1250 would mark a resumption of the broader down move and open the door to a test back towards 1226.

A breakdown below 1250 would mark a resumption of the broader down move and open the door to a test back towards 1226. That level was tested on Friday, but it did not hold as expected (the breakout was at 1247).

A break below this level would be bearish for gold prices, since it would signal that investors are looking for further downside in order to close out their short positions. The next support comes in at 1175-1180 then 1100-1110 before testing 1000 again later this year.

The US Dollar weakness is clearly still in play but it may be too early to expect a more significant pullback.

The US Dollar weakness is clearly still in play. However, it may be too early to expect a more significant pullback.

The dollar index had its best week since January, but it remained below the downtrend line from last month and failed to break above its 20-day moving average. The index also failed to close above 0.9800 for the first time since mid-December 2017 on Thursday (Figure 1).

In fact, if we look at monthly data from our Fundamental Analysis module, we can see that there has been very little interest around this level over recent months (Figure 2). We would need more information before seeing any meaningful change in sentiment towards risk assets such as gold or silver versus traditional safe havens like US Treasuries or German Bunds; however I do believe that this could happen sometime soon given how weak USDX has been lately!

Conclusion

Gold is currently consolidating around the 1250 level, with a clear bearish resolution looming ahead. However, if price breaks below this support, then a test back towards 1226 may be in store.

 

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