Gold Price Forecast | Gold Continues to Drift Higher

The gold market has been somewhat choppy over the last several weeks, but on the whole, has been rising for some time. While we have seen the 50 Day EMA offer a bit of a trend line, it’s also worth noting that each successive swing low on the chart is higher than the one before it. That being said, there is still a very obvious resistance barrier above that has to be watched very closely.

Massive Ceiling

The $3500 level is probably the most obvious level on the chart, as it has seemed a couple of failed attempts to break above it. Furthermore, gold does tend to favor seeing reactions at large, round, psychologically significant figures, and one of course would have to assume that there is a significant amount of options traded near that area, thereby forming a bit of a barrier via multiple trading strategies.

That being said, the beauty of the chart is the simplicity. It is obvious that if we can break above the $3500 level, gold should really start to take off. The so-called “measured move” of the potential ascending triangle would suggest that gold could eventually reach the $3800 level, as the height of the consolidation has been $300.

This isn’t to say that the market has to go straight up in the air. This time of year is typically somewhat thin as many of the world’s largest traders will take vacation. Because of this, and the fact that there are some uncertainties out there, one would assume that the occasional pullback will continue to occur. Between now and the interest rate decision in September, it’s very possible that traders will be a bit noncommittal. Nonetheless, the market has been rising overall, so one would have to assume that even in this quiet environment, buyers are still stronger than sellers.

External Factors

Gold will have a lot of external factors influencing it over the next month or so. The first external factor is the speech at the Jackson Hole Symposium last Friday, which suggested that the Federal Reserve was at least open to the idea of cutting rates. The gold market typically favors this, because in theory at least, the US dollar should fall. However, that doesn’t necessarily have to be the case, and it is worth noting that there are questions about whether or not the US economy is slowing down. In that environment, you may see a “run to safety”, which would favor both the US dollar and gold.

Other factors of course could come into play such as the conflict in Ukraine, any tensions in the Middle East, and of course the fact that central banks around the world have been net buyers of gold over the last couple of years, providing a little bit of a “permanent bid” in this market. It is because of this that buyers are likely to look at dips as potential value plays, perhaps extending all the way down to the $3200 level.

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