Gold Price Talking Points:
Gold Prices Hold Key Resistance
The first week of Q4 has been quite the change-of-pace so far. After driving into the new quarter with a full head of steam, the US Dollar has turned-lower and this helped to prod the pullback in Gold prices that I had been looking for a couple of weeks ago. Gold prices pushed down to a low of 1460 last Tuesday, the first day of Q4 trade; and as the USD pullback has continued through some rather key data prints, Gold prices pushed up to a key area of resistance.
As looked at last Thursday, that bigger picture bullish trend may not yet be ready for continuation and with near-term price action holding resistance at a prior area of support, that scenario remains the same as we move into a fresh week.
Gold Price Four-Hour Chart
Gold Prices Bigger Picture
Taking a step back on the charts and it’s the potential for another 2011-type of trend that keeps the bullish side of the matter as attractive. And this meshes from a fundamental view, as 2011 was a period in which global Central Banks were all looking at looser policy options to continue the recovery from the Financial Collapse. Fast forward eight years later and a similar backdrop has developed around some of the world’s largest CB’s, the Federal Reserve included, and this is part of the reason for the persistent bullish backdrop over the past year in Gold prices.
As looked at last month, Gold prices on the weekly chart had become more overbought than at anytime since 2011. Playing into that scenario was a key area of resistance that’s proven difficult for bulls to leave behind, and this runs from Fibonacci levels at 1509 up to 1527; the same that remain in-play this morning helping to hold the highs.
So, while the longer-term, big-picture scenario here still supports bullish themes, the primary challenge at this point is one of timing. Last week’s USD reversal helped to push the bid in Gold but this is still the very early stage of that theme and will likely need to be accompanied by continued disappointment in US data. But – it does keep the watch for longer-term support as an item of interest, looking for the bigger picture bullish trend to continue up to fresh highs ahead of the conclusion of 2019 trade.
Gold Price Weekly Chart
Gold Price Strategy Moving Forward
Given the potential for a deeper pullback along with the counter-scenario of the US Dollar continuing to drop, and there’s a couple of different ways that one could approach Gold prices at the moment. I had looked at bearish pullback scenarios a couple of weeks ago but given last week’s bounce, the short-side of the matter may not be as interesting right now. Instead, traders can look to trade the topside move with either inside or outside price action.
For inside items, a pullback down to the 1486 level that had offered both prior support and resistance can keep the door open for bullish strategies. If that doesn’t hold, another support check could be sought out in the zone that runs from 1475-1480. If that doesn’t hold, however, look for fresh lows below that 1460 swing from last week, with follow-through support potential around the 1450 handle.
For outside price action and should USD-weakness continue through this week, a topside break in Gold prices through 1527 could be seen as a bullish signal of continuation potential. Follow-through resistance could be sought at the prior swing high of 1535, after which pullbacks could be followed for bullish trend strategies.
Gold Price Eight-Hour Price Chart
To read more:
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— Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX