Gold Price Forecast Talking Points:
- It was a big year for Gold as the yellow metal set a fresh all-time-high in early-August.
- Gold prices became massively overbought during this summer’s bullish run; but since setting that high in August, Gold has put in four-plus months of digestion.
- Yesterday’s price action showed a doji with tests of both support and resistance, highlighting the potential for a near-term break.
- The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.
This feels a pretty atypical holiday season and given the year that we’re about to finish up, I guess that makes sense. Normally markets are quieting in preparation for a low-liquidity backdrop as the Christmas holiday approaches. Traders’ attention is on toys and parties more so than support or resistance breaks, at least usually; but this year sees a number of peculiarities and these have been voiced fairly clearly through markets during this outlandish year of 2020.
Gold prices have remained in the spotlight throughout the year. Coming into 2020 I had called Gold my ‘top trade idea’ of the year, largely under the expectation that the FOMC would continue to soften policy after their pivot in 2019. Well, that happened, and perhaps far sooner than anyone could’ve expected. The Fed got very busy in the month of March with a series of actions that, eventually, turned an aggressively bearish equity backdrop into what became one of the strongest topside runs that I’ve ever witnessed. Gold prices benefited massively from June and into August as buyers took over and didn’t relinquish the reins until fresh all-time-highs were in-play above the $2,000 level.
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But, after that fresh high was set in early-August, the music shifted with the confirmation of a bearish engulfing pattern on the same day that the all-time-high was set. Prices quickly pulled back, finding support at a confluent zone that remains in-play more than four months later. Much of the time since that fresh high has been spent with Gold showing varying forms of digestion. There’ve been multiple fits and starts of possible breakout behavior, including around the early-November elections and, a week later, news of Covid vaccines on the way erasing the bulk of that bounce on the way to those fresh four-month-lows set in late-November.
At this point, Gold prices are bound by both big support and big resistance. For support, the same zone that…
Go to the news source: XAU/USD Readying for Break into 2021