Gold Price Technical Forecast: Short-term Negative, Long-term Positive

[ArvinIG]

GOLD TECHNICAL OUTLOOK:

• Gold trading around an area of resistance in the near-term
• Long-term chart looks bullish, but may take a good while longer to mean anything

The recent rally in gold price has it running into an area of resistance that in the near-term could shift momentum back to the downside. There is horizontal resistance running over July that is in confluence with a trend-line extending down from the August 2020 high.

This could be enough to create problems looking out over the coming days. It is hard to say with conviction how convincing of a turn lower we may see given the generally choppy trading conditions we have seen since the second half of 2020.

Tactically speaking, the current area may offer an opportunity for would-be shorts who are looking for a reversion type trade, but expectations should be towards only seeing a temporary move lower until we get further clarity.

GOLD DAILY CHART

Gold Chart by TradingView

The longer-term picture is a bit clearer. Dialing back to a monthly chart the up trend in gold is still well intact even if it feels like it isn’t given what has happened since 2020. The time since the August 2020 high is looking more and more like a consolidation that will lead to another bull market surge at some point.

The operative words being “at some point”. It’s been over a year-and-a-half period of nothingness and the time for a big move may be a good number of months away. But nevertheless a move higher at this juncture looks like the more probable outcome.

One scenario that could really set things up nicely, and this is only a rough scenario at this time. If we see gold weaken below big support around 1676, the March 2021 low, and quickly recover back above. It would be viewed as a wash-out move that gets remaining longs to capitulate.

Gold has failed to rally with the overall commodity bull market and deliver as an inflation hedge. Bitcoin has been a problem for the ‘old-school store of value’. Gold’s inability to act well has certainly taken its toll on long-term bulls, a final rinse and reverse may be just what gold needs.

But even if that scenario doesn’t evolve and gold starts to surge higher by taking out 1916 for starters, a bullish bias could quickly reassert itself and gear up gold for a move well into new record territory.

GOLD MONTHLY CHART

Gold Chart by TradingView

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DISCLOSURES

Paul Robinson, Market Analyst, DailyFX
11 February 2022