Gold Price Analysis: USD 1600 is the major pivot level but is the retracement over?
|- Gold is back in favour but in the short term, the price has dipped below USD 1600 per ounce.
- The market is potentially gearing up for another move higher after USD 1586.46 was rejected to the downside.
Macro backdrop
Gold has been pulling back up since the recent low on March 16th. It's amazing to think that in these uncertain times the price fell to hit a low to USD 1451.32. It was said a rush for cash was the reason for the drop to meet margin calls and redemptions. Regardless of the reason, it provided a great opportunity to get long of the safe-haven asset. Now many gold bugs are projecting the price of gold to hit the 2000 mark as the uncertainty continues.
Gold 4-hour chart
Looking at the technicals now, It seems the price is setting up for a 5th wave up. This means the rejection if $1640 was the top of wave 3 and USD 1568.46 is the potential start of the wave 5 up. If this is the case then the extensions higher could get as high as USD 1690.00. There are times Elliott Wave patterns fail and in this case, a break back below the previous wave low support of USD 1568.46 would be that trigger.
The moving averages are also a good sign. The price has crossed the 55 EMA to the upside but is just about to meet the 200 SMA on the 4hr. In contrast, on the daily chart, the price is trading above both of them. The daily chart MA's hold more significance so I would use them as the signal. So, in this case, it's bullish.
The RSI is throwing up a great signal. When the market is making higher lows but the RSI moves into oversold areas its called a failure swing. This is a bullish signal as it means the price has more room to move higher. The key is a break of the 50 mid-line as it can be confirmation of a move up.
In terms of support and resistance zones, the main thing to look out for is the break of the black trend line. If the trendline breaks to the upside then both blue resistance zones become the obvious targets.
Overall there is more bullish technical signals than bearish ones. This would be confirmed by the fundamentals if the US economy has to be closed longer than previously thought. The excess stimulus being pumped in by the worlds central banks is also bullish for gold but the only issue is the rush in demand for the US dollar. Cash is king for now but if it becomes meaningless due to over flooding of liquidity the yellow metal will reign supreme.
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