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Gold Price Forecast: XAU Bulls Tempt Breakout


Gold Price Forecast:

  • Gold price are growing above a key resistance level of 1920 today.
  • Gold prices have been in digestion mode for two and a half months, in stark contrast to the bullish mania that drove prices from mid-June to July.
  • The analysis contained in item based on Price action and graphic training. To learn more about price action or chart patterns, check out our DailyFX Education section.

Gold prices have been in digestion mode for two and a half months now. It might be hard to believe if we go back to early August, when gold prices were showing signs of mania on their way to new all-time highs. What was perhaps most remarkable about this movement was how incredibly one-sided it was from late June to July. Gold prices have removed a number of key resistance levels along the way; but this was a fairly clear example of a trend state in a cyclical market.

This new all-time high quickly showed a bearish signal on August 7e. As written in the Gold technical forecasts for this week, the Friday bar responding to this new historical record closed as a bearish engulfing pattern; then the following week brought a retracement of over $ 200 as the bulls escaped and prices tried to level out.

To learn more about bearish engulfing patterns, check out our DailyFX Education section.

Daily Gold Price Chart

Daily Gold Price Table

Graphic prepared by James stanley; Gold on Tradingview

This retracement found some support at a confluence point on the chart, but the bulls were not yet ready to continue the move. In fact, we may still be in that place where the bulls are not yet ready to continue as the past two and a half months have caused a continuing case of gold price digestion.

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This digestion took the form of a falling wedge pattern; and given the context, this falling wedge takes on similar tones to a bull flag formation. Bearish corners and bullish flags will often be approached with a bullish focus, looking for buyers to regain control after digestion of a recent and fresh high.

Nor would it be the first time that gold prices have suffered a long period of digestion in this recent bull cycle: similar cases occurred in February-May of last year; and then again from September to December of last year. Each of these digestive themes took months to come to terms; with bulls that end up winning and continue to lead the surface theme.

To learn more sure drop wedges or bull flags, check out our DailyFX Education section.

Weekly gold price chart: month of long digestion in bearish coins

Table of weekly gold prices

Graphic prepared by James stanley; Gold on Tradingview

The big question at this point is whether the bulls take over the reins. Price action is testing above the resistance trendline constituting the formation of the falling coin, and prices are currently holding above a very key price on the chart at 1920. This level was the most all-time high for over seven years before being pulled off by an uptrend in July. It has since caught multiple resistance inflections as this digestion continued and could possibly be reassigned to lower support when buyers finally regain control of the issue.

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At this point, the line in the sand of interest appears to be around 1933, which is the current monthly high. A breach above which exposes a Fibonacci level at 1943.41; and a test there opens the door to higher-lower support around the 1920 level.

Gold bulls should, however, continue to exercise caution until this new monthly high kicks in. A similar situation arose a few weeks ago – with bulls breaking above 1920 only for prices fall back into the previous range.

Four Hour Gold Price Chart

Four hour gold price chart

Graphic prepared by James stanley; Gold on Tradingview

— Written by James stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX



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