Sometimes it’s worth just zooming out on a chart and giving yourself some time to think about what you are seeing. The price of gold is currently providing a masterclass in price behaviour and giving plenty of reason to pause for thought, wondering just what the heck is going on.
Every year since 2020, the price of the metal has managed a surge just above $2,050, invariably falling back sharply in horror at the enormity of its task. Curiously, the fall back experienced following this year's attempt hasn’t (yet) mirrored the drops of previous years.
Traditionally, this should indicate any future lunge upward which betters the previous highs will provide considerable entertainment and, in the case of gold, there’s an implicit suggestion a future $2,357 should exert a long-term attraction as a future ambition.
Unfortunately, there’s a couple of things worthy of consideration. When we take movements in 2023 into consideration, apparently above $1,975 should promote gains to the $2,000 level again with our longer-term secondary, if bettered, at $2,054 eventually.
This secondary target is a nuisance, visually matching the three previous highs, once again threatening sufficient reason for reversals due to a perception that gold has declared an invisible glass ceiling just above $2,050 dollar. Perhaps it shall be the case that our calculation of $2,357 shall be something promised but never actually attained.
Near term, we’re a little nervous, especially as far too many gold price movements from a Big Picture perspective make the metal feel like it’s under a degree of manual control and essentially being manipulated, with attempts to stop it heading upward uncontrollably and equally restrained from dropping too far. The picture of the chart since 2020 tends to echo this sentiment as the median value looks like it’s somewhere around $1,830.
Currently, it’s the case that below $1,932 works out with a reversal ambition to $1,873 with our secondary, if broken, calculating down at $1,826, almost exactly promising a drop to the median level once again. It’s interesting to note below $1,800 theoretically works out as entering a reversal cycle to an eventual $1,541. Visually, there’s little about such a target level which would justify such a degree of reversal.
In summary, our suspicion is that gold shall probably be worth a short position if the $2,054 level makes an appearance as the market feels determined to keep the yellow metal under control.
Source: Trends and Targets. Past performance is not a guide to future performance.
Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.
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