- Gold awaits bullish breakout.
- Technical charts show breakout is overdue.
Elvis Presley's "so close, yet so far from paradise" best describes the situation in the gold market.
The technical and fundamental factors are biased bullish, still for some odd reason, the yellow metal continues to have a tough time crossing the all-important resistance zone of $1,350 to $1,380.
Daily chart
The yellow metal witnessed a bull flag breakout on Wednesday, opening the doors for a rally to $1,466 (target as per the measured height method). But, prices fell back to $1,333 the very next day, pouring cold water over the optimism.
Since January, gold has failed four times to hold on to gains above the $1,350 mark. Also, gold's Brexit referendum rally had run out of steam near $1,379 - 38.2 percent Fibonacci retracement of the drop from 2011 high to 2015 low.
Still, despite the "bull flag fakeout", the technical outlook remains bullish as indicated by the momentum studies: 5,10, 21 MAs (moving average) are trending north, indicating bullish setup. The 50,100 and 200-day MAs are aligned in favor of a bullish move.
Weekly chart
The weekly chart shows a big rounding bottom pattern, a rising channel (representing higher highs and higher lows) and a bull flag. The moving averages - 5,10, 50, 100 and 200 are biased bullish.
Further, the weakness in stocks, US-China trade tensions, and geopolitical tensions are all gold positive. Clearly, the technical and fundamental factors call for a much higher gold price... So, the breakout is so close, yet so far.
That said, the post-breakout move will likely be violent... a near 90-degree rally towards $1,481 (50 percent Fibonacci retracement of the drop from 2011 high to 2015 low) could unfold in a couple of weeks, given the breakout has remained elusive for almost two years now.
A bull flag breakout on the weekly chart (as per weekly closing) will likely set the tone for a rally to $1,480-$1,500.
On the downside, acceptance below $1,300 would add credence to repeated rejection in the $1,350-$1,380 range and would shift risk in favor of a sustained drop to $1,250-$1,240.
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