Gold at the Highest Level in the 21st Century

On Thursday, gold hit another fresh peak, but is everything in favor of the bulls?

Technical Picture of Gold

Let’s start my first article on gold with the short-term perspective.

Will the daily chart reveal any valuable details about the future fate of the gold price?

Let’s find out.

Gold at the Highest Level in the 21st Century - Image 1

The first thing that catches the eye is the breakout above the upper border of the purple triangle. This bullish development was preceded by the breakout above the 50-day moving average, which started a consolidation (marked with orange). In this way, the bulls have accumulated enough strength to successfully attack the higher levels.

During the first session of the month, they stormed north, breaking not only above the upper line of the orange consolidation, but also above the upper border of the triangle.

Thanks to the large white candle (materialized on significant volume) formed that day, gold bulls broke above the Feb. high and approached the late Dec. peak. This show of strength resulted in further improvement in the following days, which translated into a rally that took the price of gold to fresh highs.

On Wednesday, gold closed the day above the early-Dec. high, neutralizing the bearish engulfing pattern (marked with the red ellipse) and depriving the bears of a valuable ally hindering the path to higher levels.

Yesterday, we saw another upswing, which took gold to another fresh high of 2,172.20, but despite this improvement, the price pulled back before the end of the day, leaving on the chart a white candle with a prolonged upper shadow, which suggests that the strength of the bulls may be weakening a bit – especially if we add the fact that the size of yesterday’s volume was visibly lower than in the previous days.

Additionally, when we take into account the above-mentioned breakout above the upper border of the purple triangle (marked with dashed lines), we see that the price approached the area, where the size of the upward move will correspond to the height of the formation, which may encourage the bulls to take profits off the table and lure the bears to the trading floor.

At this point, it is worth noting that there are negative divergences between the CCI, the Stochastic Oscillator and the price, which suggests that the space for gains may be limited (especially when we factor in the broader perspective and disappointing volume during yesterday’s session, which raises some doubts about the strength of the buyers) and reversal may be just around the corner.

Summing up, gold bulls took the price of the commodity to the highest level in over 50 years, breaking above the long-term key resistance line and the 2023 peak. Despite these positive developments, there are technical factors that suggest that the space for gains (at least in the very short term) may be limited and reversal can’t be ruled out in the coming day(s).

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Have a wonderful weekend and see you on Monday.

Anna Radomska