Despite the bullish setup on the gold monthly chart, a bullish breakout remains elusive. However, the Bollinger band study (20MA, Std. Dev. of 2) indicates the breakout will likely happen soon.
Monthly chart
Gold rose to four figures (above $1,000) in March 2008 and since then the gap between the upper Bollinger band and the lower Bollinger band has ranged from $760 (March 2014) to $194 (November 2017). As of writing, the gap is $203, meaning the Bollinger bands are 57 percent narrower than the long-term average of $477.
Also, the gap has been below $210 since September 2017, meaning the yellow metal has witnessed consolidation for almost five months. An extended period of consolidation is usually followed by a big move on either side. It is likely it would be a bullish breakout as indicated by the long duration charts.
- Read - Gold risk reversals retain long-term bullish bias: XAU/USD 12-months 25 delta risk reversals show XAU calls (buy gold) remain firmly bid.
Further, the macro factors also support gold. The US 10-year treasury yield confirmed an inverse head and shoulders breakout earlier this month, signaling an end of the multi-decade bull market in bonds. This, coupled with fears of faster Fed tightening could send the 10-year well above 3 percent this year.
The rising treasury yield is usually USD bullish (and gold bearish). While this may be true, the rising yield environment could spook the equity markets (as seen earlier this month). It is widely believed that equities could suffer another round of sell-off once the yield finds acceptance above 3 percent. The resulting haven demand could boost gold prices.
Hence, the metal will likely see a convincing move above the upper Bollinger band in the next few months and could rally towards $1,450 before the year-end.
- Read - Goldman Sachs raises gold price forecasts
Week Ahead - Focus on the key trendline
As far as next week is concerned, the focus is on the trendline sloping upwards from the Dec. 12 low and the Feb. 8 low.
Daily chart
- The metal has defended the trendline support this week. However, only a close above 10-day MA (currently seen at $1,339) would open doors for a re-test of the Jan. 25 high of $1,366.
- On the other hand, a close below the ascending trendline could yield a sell-off to 100-day MA of $1,300.
- A daily close below $1,300 would signal bullish invalidation.
- On a larger scheme of things, a convincing break below the December low of $1,236.45 would signal a long-term bullish-to-bearish trend change.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD fluctuates near 1.0700 after US data
EUR/USD stays in a consolidation phase at around 1.0700 in the American session on Wednesday. The data from the US showed a strong increase in Durable Goods Orders, supporting the USD and making it difficult for the pair to gain traction.
USD/JPY refreshes 34-year high, attacks 155.00 as intervention risks loom
USD/JPY is renewing a multi-decade high, closing in on 155.00. Traders turn cautious on heightened risks of Japan's FX intervention. Broad US Dollar rebound aids the upside in the major. US Durable Goods data are next on tap.
Gold stays in consolidation above $2,300
Gold finds it difficult to stage a rebound midweek following Monday's sharp decline but manages to hold above $2,300. The benchmark 10-year US Treasury bond yield stays in the green above 4.6% after US data, not allowing the pair to turn north.
Worldcoin looks set for comeback despite Nvidia’s 22% crash Premium
Worldcoin price is in a better position than last week's and shows signs of a potential comeback. This development occurs amid the sharp decline in the valuation of the popular GPU manufacturer Nvidia.
Three fundamentals for the week: US GDP, BoJ and the Fed's favorite inflation gauge stand out Premium
While it is hard to predict when geopolitical news erupts, the level of tension is lower – allowing for key data to have its say. This week's US figures are set to shape the Federal Reserve's decision next week – and the Bank of Japan may struggle to halt the Yen's deterioration.