Gold forecast: Pullback on the radar - just don’t expect Armageddon

Article By: ,  Market Analyst
  • Bullish momentum is waning
  • There's a slight RSI (2) divergence
  • Three upper wicks show a reluctance to hold above $2500 immediately

 

And this places a potential retracement lower on the cards. Yet as much as that excites the potential for a pullback, it's difficult to construct an overly bearish case with the current backdrop of geopolitics and potential CB easing. So the basic thesis is that any pullback at this stage may be limited, and bears may want to be nimble with their shorts. At the same time, these may not be the levels bulls want to reload either.

 

Ultimately, unless we see the gold basket or XAU/USD dip back within 2-day bullish rally on March 1st and 2nd (below the prior ATH), any retracement could be limited.

 

And specifically, there's a nice volume cluster around $2456 on the gold basket which could act as support initially, which equates to a -1.7% move lower from current levels A break beneath here brings the previous ATH (all-time high) into focus, which is around -3% from current levels. And as the rally for gold has been broad-based, XAU/USD traders may want to monitor the general performance of gold to better pick potential swing points on gold against the US dollar.

 

 

Gold market positioning from the COT report:

A look at positioning also shows support for XAU/USD futures (gold in US dollars) with large speculators and managed funds trimming shorts with longs trending higher. Sure, there's a case for gold to lose some steam with large specs ~200k net long and managed funds ~140k net long, but net-long exposure is not extreme by historical standards. And this further suggests that any pullback may be limited without

 

 

 

Gold technical analysis:

The rally to new highs on gold against the US dollar seems less impressive than the broad-based rally on the gold basket. And that is down to the strength of the US dollar. Yet the potential for at least a near-term reversal on gold seems apparent here too. A bearish divergence has formed on RSI (2) and RSI (14), two bearish pinbars have formed – one of which is a lower high and both failed to close above $2200. In fact, Tuesday’s bearish pinbar met resistance at the $2200 handle.

 

There is also a potential head and shoulders top on the daily chart, which projects a target around $2070, near the 2020 high.

 

  • For now, the bias is for a move to $2050, and bears could fade into minor rallies whilst prices remain below $2200.
  • A break below $2046 confirms the head and shoulders pattern, although for that to happen we likely need to see the gold basket also break below its prior all-time high.

 

 

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

 

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.

© FOREX.COM 2024