Gold Price Outlook: XAU Breakout Releases 1800

0
93


Gold price analysis:

  • Gold got off to a quick start in the third quarter, with gold prices hitting a new high in eight years.
  • Today’s escape has caused gold to fly beyond a few previously key resistance levels.
  • Can golden bulls gather even more strength? The answer to this is probably based on FOMC expectations and advice on what might be in the next corner.

Gold Breakout sort 1800

It was a good start for the prices of T3 and H2 for gold. After spend about two months in a fairly constant range in the second trimester, buyers started pushing in late June and as the page changed in July, that strength continued to manifest. This allowed the price of gold to set a new high, this time an eight-year high, as the swing from 2012 to 1796 was traded.

As watched last week, July trade started hot in gold as bulls hit new high shortly after midnight Eastern time; and this was followed by a quick withdrawal, with a demonstration of support around the previous resistance, taken from the height of the seated swing at the approximate level of 1765. Since then, buyers have remained important and responsible, helping to break the level of 1800 on the way to these new eight-year highs.

Eight Hour Gold Price Graph

Graph prepared by James Stanley; Or sur Tradingview

Gold prices test key area on long term charts

This recent upward breakthrough has propelled gold prices into a rarefied air. Gold has traded above 1800 for quite some time, and the last time it did, hopes remained that gold prices would continue to rise similarly to what had occurred in the context of 2008-2011. But, while the FOMC decided to normalize its policy by finally raising rates and reducing the balance sheet, gold prices fell from 2012 to 2015, then spent most of the period 2016 to 2018 under various forms of average reversion and activity linked to a range. It is in the past seven quarters that gold bulls have really taken control of the issue, and the monthly chart below highlights the importance of price developments.

Gold forecast
Recommended by James Stanley

Download our Q3 Gold forecast

Table of monthly gold prices

Monthly gold price table

Graph prepared by James Stanley; Or sur Tradingview

Gold prices rise as expectations around FOMC remain ready for hosting

There have been a few import moments in the past four months that can help focus on various themes. One was a comment from FOMC President Jerome Powell, in which he said in a TV interview that there was “no limit” to what the Fed could do with the loan programs available to them. This interview was released shortly after the market opened on Sunday, after which gold prices exploded, albeit temporarily, before falling back into the range.

But – as noted at the time of this event, it simply highlighted the potential for future strength of gold if expectations remained or, perhaps, even built more housing for the world’s largest national central bank , as the United States seeks to compensate for at least some of the economic destruction associated with the coronavirus.

Build confidence in trade

Build confidence in trade

Recommended by James Stanley

Build confidence in trade

Thus, despite the long-term overbought readings, the bulls could continue to follow the offer; similar to how stocks remained almost stubbornly strong in the face of rather dire economic data.

It is not that the economy and the stock market are divorced: it is rather the stock market which is a manifestation of expectations when reality is, by nature, focused on the present. So the big hope is that the Fed will prevent the economic destruction of the coronavirus. The tools to achieve this would probably be even more accommodation, an even more passive monetary policy and, perhaps, a weak US dollar that could continue to push up gold prices.

For gold bulls looking for a strategy, the potential to support past resistance can be an interesting way to move forward. This eight-year high was around the 1796 level, and the 1800 level is a major psychological point. Collectively, this can produce a support “zone” that could allow a bull focus area. Below that, the highest previous resistance swing around 1787 can be considered a support area ‘s2’, with the previous swing around 1775 functioning as a type of potential support area ‘s3’.

Four hour gold price chart

Four hour gold price chart

Graph prepared by James Stanley; Or sur Tradingview

– Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

LEAVE A REPLY

Please enter your comment!
Please enter your name here