Technical Analysis

Gold Price Forecast: Bull Flag Breakout in Progress

Gold price outlook:

  • Gold prices has overcome the resistance of the bull flag for several months, increasing the confidence that the march is back to all – time highs.
  • Weakness of US Treasury profitability and US dollar (Via the DXY index) will help gold prices rise significantly on Monday.
  • Accordingly IG customer mood index, the price of gold is confusing in the near future.

Keeping for profit

Gold prices have continued to rise at the beginning of the new week, rising by just over + 0.1%, as both US Treasury revenues and the US dollar (via the DXY index) have softened. Marchives continue to monitor cryptocurrencies around the world after another wave of intense sales over the weekend, a fresh circle of dip-buyers responded. Given the success of gold in the sale of cryptocurrencies, it must be said that further weakness in cryptocurrencies may help raise the price of gold in the near future.

Gold volatility is declining, gold prices are not

Historically, gold prices, unlike other asset classes, have been linked to volatility. While other asset classes such as bonds and shares do not like increased volatility signaling greater uncertainty about cash flows, dividends, coupon payments, etc.gold tend tos benefit during periods of higher volatility.

GVZ (Gold Volatility) Technical Analysis: Daily Price Chart (May 2020 – May 2021) (Chart 1)

Gold price forecast: the breakthrough of the bull flag is in progress - XAU / USD levels

The volatility of gold (measured by the Cboe Gold Volatility ETF, GVZ, which tracks the expected one-month volatility of gold derived from the GLD options chain) is 16.87, which is almost a two-month high. near the highest level since the end of March. It is noteworthy that the decline in the decline in gold has not been matched by the decline in the price of gold (usually the development of gold has increased). The 5-day correlation between GVZ and the price of gold is +0.32, while the 20-day correlation is +0.83. One week ago, on May 12, the 5-day correlation was +0.33 and the 20-day correlation was +0.89.

Technical analysis of the price of gold: daily schedule (March 2020 – May 2021) (Figure 2)

Gold price forecast: the breakthrough of the bull flag is in progress - XAU / USD levels

Preeris gold price forecast, it was noted thateven if a daily doji candle hints at potential indecision after a recent leg upwards – thus allowing some technical breathing space – as long as technical research is supportive, the policy is to “buy a dip” as a bullish breakout from a multi-month bull’s flag requires a longer bullish trading position. “It simply came to our notice then.

Gold’s upswing has accelerated since the last update, with daily MACD rising above its signal line, while daily Slow Stochastics are on overbought territory. In addition, gold prices remain above their daily 5-, 8-, 13- and 21-EMA envelopes, with gold prices not closing below their daily 5-EMAs over the past two weeks.

Technical analysis of gold prices: weekly chart (October 2015 – May 2021) (Figure 3)

Gold price forecast: the breakthrough of the bull flag is in progress - XAU / USD levels

It has previously been stated that “if the wider boundary of the expanding parallel channel, formed in relation to the all-time high of August 2020, remains in place, it is now back to 1763.36, the setback gives long-term bulls hope that, keeping the pandemic on the rise, gold prices will set the bull’s flag for nine months. When gold prices are over1837 by 15 June at the latest gold prices seem to be going up new vertices next to end of the year.“The conditions are met, which indicates that the breaking of the bull ‘s flag has begun and the march to the all – time highs has begun.

IG CUSTOMER SENTIMENT INDEX: COST PRICE FORECAST (May 24, 2021) (CARD 4)

Gold price forecast: the breakthrough of the bull flag is in progress - XAU / USD levels

Gold: Retailer data show that 74.95% of traders are net long, the ratio of long to short traders is 2.99: 1. The number of net long traders is 4.80% higher than yesterday and 2.16% lower than last week. The number of net-short traders is 5.38% higher than yesterday and 5.93% higher than last week.

We usually view the contradictory situation of the crowd, and the fact that traders are net long indicates a continuing fall in the price of gold.

Merchants are less than last week compared to last week. Recent mood swings warn that the current trend in the price of gold may soon turn higher, despite the fact that traders will remain the length of the network.

– Written by Senior Currency Strategist Christopher Vecchio, CFA

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