Gold - Bullish trend has resumed

In the recent past we suggested that the bullish breakout above 1835 USD resistance level would take place. We also noted that it would be followed by resumption of the uptrend. The bullish breakout occured and gold broke above 1850 USD and 1877.14 USD (important resistance levels). Currently, gold trades slightly below 1900 USD price tag which remains our short-term price target. We remain bullish on gold and we expect the bullish trend to continue. Indeed, we expect gold to hit a new all time high value in the current bullish cycle. Our view is supported by bullish technical indicators on daily, weekly and monthly time frames. Additionally, our view is supported by fundamental factors such as high inflation and low interest rates in the United States. We expect the FED to raise interest rates by 25 basis points next month; and we view it as a substantial threat to the global economy. Because of that we would like to set the medium-term price target for XAUUSD to 1925 USD (this price target will change to short-term once 1900 USD is taken out).

Illustration 1.01

Illustration above shows the weekly chart of XAUUSD. The rectangle pattern spreads between 1750.740 USD and 1834.195 USD. The picture also depicts volume below the candle chart. Extreme increase in volume coincides with the bullish breakout above 1835 USD resistance level. Such a high volume was unseen since June 2013.

Technical analysis - daily time frame
RSI is due to perform crossover above 70 points which is very bullish. We expect this phenomenon to be accompanied by further rise in the price of gold. MACD and Stochastic are also bullish. In addition to that, DM+ and DM- show bullish conditions in the market. ADX continues to increase which suggests the bullish trend is gaining strength. Overall, the daily time frame is very bullish.

Illustration 1.02

Picture above shows the daily chart of XAUUSD. It also shows the difference between previous bullish breakouts and the most recent one. Spike in volume is clearly observable on the most recent bullish breakout above 1835 USD.

Technical analysis - weekly time frame
RSI, MACD and Stochastic are bullish. Additionally, DM+ and DM- show bullish conditions in the market. ADX started to increase which suggests the bullish trend is gaining strength, similarly like on the daily time frame. Overall, the weekly time frame is bullish.

Support and resistance

Short-term support sits at 1877.14 USD. Support 1 lies at 1834.195 USD and Support 2 at 1750.74 USD. Major support level can be found at 1676.866 USD while major resistance level sits at 2075.28 USD. Short-term resistance appears at 1916.615 USD and Resistance 1 is at 1965.572 USD.

Please feel free to express your own ideas and thoughts in the comment section.

DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not serve as a basis for taking any trade action by an individual investor. Your own due diligence is highly advised before entering trade.

Trade closed: target reached:

Our short-term price target of 1900 USD has been reached. Because of that we would like to change medium-term price target of 1925 USD to short-term price target. Additionally, we would like to set a new medium-term price target to 1950 USD.