Trading News since 2005

Gold price is still consolidating, but a bullish explosion could be in the making

Gold price is still consolidating, but a bullish explosion could be in the making

0

Gold has had little conviction in recent months. From October to date, the price of XAU/USD has not moved dramatically in any particular direction as it had done during the first three quarters of 2019, but has swung up and down without a fixed direction, a clear signal Consolidation This can be clearly seen in the evolution of the price that is now at $ 1478, only $ 5 above the opening level in October ($ 1473).

In consolidation phases, there is no dominant force in the market, so the price action moves on a more or less lateral trajectory. 

This suggests that there is a balance between buyers and sellers. However, all periods of laterality come to an end sooner or later with an explosive break that sets the stage for a new trend.

In the case of gold metal, the existing risk is that of an upside break for fundamental and technical reasons.

From the fundamental point of view, the distension of the trade war between the United States and China has calmed the nerves of investors, but has not significantly improved the growth prospects globally. In fact, many of the world’s major central banks such as the Federal Reserve could cut back the cost of money in 2020 to meet economic challenges. 

A more expansive monetary stance in developed markets would have a positive effect on gold whose price tends to rise when interest rates fall.

From a technical perspective, the price structure is also constructive. In the daily chart of XAUUSD you can see the formation of descending wedge, a bullish pattern according to the interpretation of the chartist analysis. 

This figure that indicates a depletion of the selling current is composed of two convergent bearish guidelines that connect a series of decreasing peaks and valleys. The descending wedge is confirmed once the price breaks its upper band that represents a resistance line. This event conveys a buy signal and can prepare the way for a strong bullish movement.

In our case, if the price of gold pierces the ceiling at $ 1477/1485, the baseline scenario contemplates an advance to $ 1520 and, in extension, to $ 1557. In the event that bears regain control of the market, the first support under consideration is located at $ 1460 and then at $ 1455/1450.

GOLD TECHNICAL GRAPH

GOLD TECHNICAL GRAPH

Leave A Reply

Your email address will not be published.