Jump to content

Gold Price Forecast: Gold Snaps Back After Key Resistance Test to Start 2022


Recommended Posts

GOLD TALKING POINTS:

  • Gold prices are starting the year with a heavy hit after testing a key spot of resistance around 1830.
  • Longer-term gold prices are set up in a bearish manner, with a descending triangle showing on the weekly chart. The 1680 zone of support saw three separate tests last year in March, April and August. Will it be able to hold a fourth attempt?
  • The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.
Gold Price Forecast: Gold Snaps Back After Key Resistance Test to Start 2022

It was January 6th of last year that Gold prices really started to tumble. Before that, there was hope that buyers would be able to continue the bullish trend that was so pronounced in the first eight months of 2020 trade, but after the bearish engulfing candlestick showed up a little over a year ago, the high was set and Gold prices wouldn’t encroach upon the 1950 level again for the rest of the year.

Coming into 2022 trade, there was a bit of optimism, with perhaps an extra sense of caution given just how badly last year had turned out for gold bulls. After the December FOMC rate decision, gold prices built-in support around the 1760 level and that led to a trickle-higher with prices breaking out on the final day of 2021 trade to run up to a key zone of confluent resistance around the 1830 handle.

But that resistance test has so far brought a decisively bearish response as markets begin their first trading day of 2022. The prices of 1829 and 1832 are both Fibonacci retracements, the latter of which is the 38.2% marker of the 2020-2021 major move.

This same confluent zone caught highs in Gold during July, August and September of last year.

GOLD DAILY PRICE CHART

Gold daily price chart

Chart prepared by James Stanley; Gold on Tradingview

GOLD LONGER-TERM: DESCENDING TRIANGLE

Taking a step back on the chart and there’s bearish potential here for 2022 trade, and this seems to mesh with the fundamental environment in which the Fed is expected to begin lifting rates at some point this year.

And to confirm the importance of that theme, mesh the top in gold in August of 2020 with the rise in Treasury yields; and as signs have mounted that the Fed may be pushing rates higher Gold prices have continued to plummet.

Last year saw three different tests of the 1680 zone on the chart, which I’m extending up to 1700 to create a support area that’s served as a recent floor. That horizontal zone came into play in March, April and August, with an assist in August from a longer-term Fibonacci retracement from which a 38.2 plots right at 1682.

Of note, those support bounces appear to be carrying a diminishing marginal impact, which has allowed for a bearish trendline to form. The bearish trendline combined with horizontal support makes for a descending triangle formation, which will often be approached with the aim of bearish breakdowns.

Given the longer-term nature of the below chart, timing remains of issue, but the accompaniment of a shorter-term bear flag keeps the look on the short side of the market; and this morning’s resistance rejection at a key spot on the chart illustrates that potential.

GOLD WEEKLY PRICE CHART

Gold weekly price chart

Chart prepared by James Stanley; Gold on Tradingview

 

Written by James Stanley, Senior Strategist for DailyFX.com. 3rd Jan 2022.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Posts

    • Sainsburys full year earnings and Unilever’s first quarter trading update both say the same thing, UK consumers are in for higher prices. The war in Ukraine, supply chain issues and the effects of ongoing Covid all to blame.      
    • US Dollar (DXY) Daily Price and Analysis US Q1 GDP may stall the greenback’s advance. A 20-year high nears for the US dollar. The multi-month US dollar rally continues with the greenback printing a fresh high today ahead of the first look at US Q1 GDP at 12.30 GMT. The US dollar basket (DXY) has been boosted by renewed weakness in the Euro and the Japanese Yen, as investors move from lower-yielding to higher-yielding currencies, while safe-haven flows continue to benefit the greenback. The US growth release later in the session is expected to show a sharp slowdown from the robust Q4 figure of 6.9%. The markets are currently pricing in growth of just 1% for the first three months of this year, with the slowdown mainly due to a reduction in inventory accrual over the quarter. This release is unlikely to move the greenback, unless there is a large miss or beat, as the Fed believe that 2022 US growth will be robust enough to let them tighten monetary policy sharply without damaging the economy. The latest US Core PCE data – the Fed’s preferred inflation reading – is released on Friday and this may have more effect on the US dollar than today’s GDP data. For all market moving economic data and events, see the DailyFX Calendar. The ongoing US dollar rally has been aided by weakness across a range of G7 currencies including the Euro, the Japanese Yen, and the British Pound. The Euro continues to battle with lowly growth expectations, exacerbated by energy concerns, the British Pound is mired by weak economic data, while the Japanese Yen is in freefall as the BoJ continues with its ultra-loose monetary policy.   The US dollar continues to press higher and looks set to break above 103.96, the March 2020 high. Above here the US dollar would be back at levels last seen nearly two decades ago. The March resistance will likely hold in the short-term, especially with month-end portfolio rebalancing at the end of the week, but US dollar strength is set to continue in the months ahead. USDOLLAR (DXY) WEEKLY PRICE CHART – APRIL 28, 2022 {{THE_FUNDAMENTALS_OF_BREAKOUT_TRADING}} What is your view on the US Dollar – bullish or bearish?   Apr 28, 2022 | DailyFX Nick Cawley, Strategist
    • While Tesla has nothing directly to do with Elon Musk buying Twitter - TSLA stock closed down 12% on news that Musk may have to sell stock and use other holdings to stand against the loan to finalise the purchase of the social media giant.        
×
×
  • Create New...