1. Review
After the sharp two-month rise to a new all-time high of USD 2,149 on December 4th, the gold market initially experienced a sharp setback to USD 1,973 in the final weeks of the old trading year and then a rapid recovery to USD 2,088. In order to digest this overall rather wild price development, gold prices initially entered a slow and confusing sideways phase since the beginning of the year. This was the only way to calm the overbought situation after the roller coaster ride.
As part of this consolidation, any attempts to break out on the upside repeatedly failed at the resistance zone around USD 2,055. At the same time, the psychological level of USD 2,000 also withstood the attacks from the bears. It wasn't until mid-February that they finally achieved their supposed breakthrough downwards. However, the price slide below USD 2,000 quickly turned out to be a bear trap, because starting from the low of USD 1,985, the gold price regained psychological support on the next trading day with a closing price of USD 2,004.
As a result, gold prices rose steeply and continuously for a total of 18 trading days from February 14th. This rally has accelerated since breaking above the downtrend line at $2,055 a week ago on Friday. The price of gold not only easily surpassed the old all-time high of USD 2,075, but also rose to its highest level of all time at USD 2,195 during the last trading week.
Without a doubt, the 13-year correction and consolidation phase, which repeatedly brought about the end of all bullish efforts in the range between USD 1,900 and USD 2,075, has finally come to an end. Consequently, the steep breakout rally brought the price of gold up by over USD 210 in a very short time. Regardless of short-term setbacks or interim consolidations, in the bigger picture this should only mean the beginning of the next big upward movement in the precious metals sector!
Gold in US dollars,weekly chart as of March 11, 2024. Source: Tradingview
After the first attempt in December failed, the price of gold clearly and clearly jumped over the major resistance of the last three and a half years in the area around USD 2,075 in the week before last. This confirms the large inverted shoulder-head-shoulder formation and the long wait is finally over. The price target from this formation is around USD 2,535 and, in the best case scenario, could be reached directly in a volatile move!
However, the gold prices on the weekly chart are currently well outside the upper Bollinger Band ($2,153). Statistically, the air would be a bit thin with prices around USD 2,180 to USD 2,200, at least in the short term.
However, one should not underestimate the fact that the energy that has been pent up over three and a half years is now being released on the gold market. The momentum is clearly on the side of the bulls. It can also be assumed that after the two and a half months of consolidation, the ongoing rally will not end after just three weeks. In case of doubt, the upward ride continues quickly but volatile.
Overall, the weekly chart is bullish. The gold price should be on the way towards USD 2,535 in the medium term. Significantly higher rates are also conceivable afterwards. Possible pullbacks to the old resistance zone in the area between USD 2,075 and 2,100 should still be taken into account and used as a buying opportunity.
2. Daily chart: Stochastics embedded bullish
Since the low on February 14th at USD 1,985, the price of gold initially exploded slowly, but since Friday, March 1st, it has exploded almost vertically. Any resistance was broken in no time and the price of gold continued to climb every day. A new all-time high has already been reached at $2,195. The old high from December 4th at USD 2,149 only caused a slight reduction in the upward momentum.
The sharpness and speed of this rally may come as a surprise to many, but we have repeatedly pointed out that the breakout will release enormous energy.
In terms of the chart, the gold price is now moving in an undefined space, as there are no longer any known resistance and support zones above USD 2,150. One can only assume, project and calculate possible trend extensions.
However, a warning also comes from the Bollinger Bands on the daily chart, as the gold price shot up outside the upper Bollinger Band ($2,187) for six days in a row. Statistically speaking, six to seven days is an absolute rarity and usually the highest of feelings.
However, in order to bring things back into balance, there does not have to be a sharp turnaround. A sideways consolidation at a high level would also ensure that price action can return within the Bollinger Bands. Looking at the new trading week, this is the most likely scenario.
However, the daily stochastics are extremely bullish. The oscillator has transformed into the rare “bullish embedded state” since the beginning of last week, cementing the upward trend. Only if one of the two signal lines falls below 80 at the daily closing price would this special condition be lost and a major setback would probably be the result. As long as the embedded state remains, any consolidations and setbacks would be seen as merely temporary respites.
Overall, the daily chart is in “super bull mode”. The probability that the gold price will at least return to the area around USD 2,100 is still not small. But at what level, when and whether at all is completely unclear. Rather, the bulls have the reins firmly in their hands and the only sensible strategy for those who have missed the rally so far is to wait patiently for a slightly larger setback.
3. Conclusion : Gold – This breakout is clear
Gold broke out to a new all-time high in the last trading week and is not yet showing any signs of a major pullback. However, a breather at a high level would be healthy.
However, after the gold price unsuccessfully struggled against the resistance around USD 2,075 for years, the starting position has now changed permanently. The trend is clearly upwards and price targets in the area around USD 2,535 appear to be achievable in the next one to three months or by early monsoon.
Nevertheless, sharp setbacks and high volatility can cause temporary discomfort and, above all, irritation at any time. Even if a very deep setback into the area between USD 2,075 and 2,125 currently seems rather unlikely, this would represent an excellent opportunity to buy again.
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