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Gold Price Forecast: Convincing Momentum

Gold prices

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The gold price is cementing itself above $1800 / ounce on Thursday and there are signs further advances are possible according to technical analyst and forecaster Richard Perry of Hantec Markets.

A decisive breakout on gold has been seen as the yellow metal has moved above $1800 for the first time since 2011.

The move has been characterised by conviction in momentum, something that has tended to be lacking in previous attempted breakouts. The daily RSI has moved into the 70s, Stochastics are consistently now above 80 and MACD lines are accelerating higher.

A breakout from the April to June trading range gave an implied target of around $1820 on a conservative basis, but the more bullish target can derive as much as $1858.

Gold price chart

There is effectively now a lack of resistance until the all-time high at $1920 from way back in September 2011, so there is little reason not to expect continued upside.

Also given the strength of momentum, we are happy to back this run higher, whilst any near term supported weakness will be seen as a chance to buy.

The latest breakout around $1789 is initial support, whilst what is close to a five week uptrend is underpinning the run higher around $1780 today.

 

Dollar Weakness Aids Gold's Rally

Wall Street bounced back yesterday to see risk appetite swing back to a more positive skew.

There has been little to really drive this move, with surging mega-cap tech stocks certainly playing a role.

However, it is also notable that the extended risk positive bias of assets are playing into this move.

Although Treasury yields are all but anchored now (as markets price for some sort of yield curve control), the dollar is suffering, as the Dollar Index falls to four week lows this morning.

There has been some uncertainty over the outlook of the dollar in recent weeks, but traders seem to be increasingly positioning for a structural dollar weakening.

It is interesting that amidst the worsening of newsflow over COVID-19 infections in the US, the dollar seems to be the main casualty here. It would suggest that the view is that as Q3 develops, the US economic recovery from lockdown will be scaled back, at least relative to other major economies.

China seems to be a beneficiary here as the yuan has strengthened below 7.00 to the dollar for the first time in almost four months.

China inflation was mildly encouraging overnight, with the Producers Prices Index inflation coming in slightly higher than expected and has helped the yuan strengthening.

Also we see traction beginning to come from the euro too, The dollar weakness has also helped to propel gold through $1800 for the first time since 2011.

This dollar negative bias is once more evident this morning, with USD underperforming across major currency pairs. Equities are edging positive (even though US futures are ticking slightly lower) as an edge of positive risk appetite builds.