Gold Price Forecast | Gold Waits for Momentum

Gold markets have been somewhat quiet over the last week, which should not be a huge surprise considering the time of year. One of the biggest mistakes traders will make this time of year is to expect a massive move to break out suddenly, at least not without some type of external factor. In fact, you could say that gold has been in a bit of a “holding pattern” as we are waiting for a couple of resolutions to questions at the moment.

What Are We Waiting for?

While one cannot postulate on what every trader out there is waiting for, there are a couple of big issues at the moment that have kept gold in somewhat of a holding pattern. The first one of course is the fact that we are in the middle of “vacation season”, meaning that a lot of the volume just simply isn’t there. That being said, this particular problem will be resolved in the next couple of weeks.

Furthermore, we have the Jackson Hole Symposium going on late this week, and that could give a little bit of insight as to how some central banks may be approaching monetary policy, not the least of which of course would be the Federal Reserve. Nonetheless, gold has been purchased by several central banks around the world all year, so it does have a bit of a “permanent bid” in it. This could be one of the reasons why gold hasn’t significantly pulled back for some time.

The Fed Funds Futures markets have priced in a roughly 90% chance of an interest rate cut in September, so this is where the market stands. They believe that the Federal Reserve will cut rates by 25 basis points, but then the question is where does monetary policy go from there? An increasingly dovish Jerome Powell, perhaps even spotted at Jackson Hole this Friday during his speech, could provide a little bit of momentum for gold as well. Furthermore, you also have to pay close attention to how the US dollar is behaving.

Technical Analysis

The technical analysis for the market at the moment is somewhat flat, but over the longer term, it is most certainly bullish. The 50 Day EMA is offering a bit of support, and in fact has acted somewhat as a bit of a trendline for several months. The upside features the $3500 level as a massive ceiling in the market, and a break above that level certainly will have a lot of “FOMO trading” entering the gold market. On the downside, if we were to break down below the 50 day EMA it’s very possible that we could go looking to the $3300 level. I also see the $3200 level as a massive floor, and anything below there would then have you questioning the overall trend of gold.

On a breakout above the $3500 level, the so-called “measured move” for gold should send this market looking to the $3800 level over the longer term. I do believe this happens, but it would not surprise me at all to see the gold market drag its feet for a while longer, as we build up pressure, and more importantly, volume to get moving. We have a convergence of a lot of external questions being answered fairly soon, and a continuation of the longer-term trend seems to be the most likely of scenarios.

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