Gold Price Analysis: Gold bugs are looking for upside levels and there is a decent one coming up

The massive amounts of stimulus being added by central banks seem to be pointing to a weaker economy but this move is also inflationary. Even as the risk environment improves in terms of the stock markets, the USD vs Gold correlation means that gold has a chance to capitalise on dollar weakness and push higher. According to Reuters, holdings in SPDR Gold Trust, the largest gold ETF in the world, rose 0.58% to 1,166.04 tonnes on Monday. this is a level not seen since April 2013.

Gold daily chart

Gold has really been shining in recent sessions, with XAU/USD breaking to 7-year highs. The 38.2% Fib Extension is projecting the price to meet the next resistance at the exact point of the consolidation top. This is the consolidation high from when the price dropped from the all-time highs back in mid-2011.

If the red resistance line does break then the market could take a run at the aforementioned all-time high of USD 1920.94 per troy ounce. There is little point analysing the indicators as they are all overstretched, but interestingly the Relative Strength Index still has room to move to the upside. The MACD also still looks like it has room to manoeuvre and both the histogram and the signal lines are over the mid-point. 

The bulls are firmly in control at the moment and there may be some ups and downs but a test of the 138.2% extension seems like it has a fair chance of succeeding.

Additional levels