Gold: is this in a win/win situation for the metal?

Gold made a bullish run during January and February of this year but has been consolidating within a $100 range between the $1,200 and $1,300 since that period. This commodity is generally supported during periods of either US$ weakness or fear-inspired ‘Flight to Safety’ activity and one has to wonder if the current climate isn’t ripe for one or other of these conditions to dominate thereby creating a win/win situation for the metal.

The markets are bracing for tonight’s FOMC and next week’s Brexit vote and the flip sides of both events could work in Gold’s favour:

FOMC:

  • A delayed US rate hike could weaken the US$ and support Gold.
  • A US rate hike could worry markets and support ‘Flight to Safety’ activity also supporting Gold.

Brexit:

  • A LEAVE result could trigger ‘Flight to Safety’ activity thereby supporting Gold.
  • A REMAIN result could trigger a risk-on relief rally that could weaken the US$ and thereby support Gold too.

In fact, I can’t see any outcome from these two events that would support conditions for a risk rally that would be paired with a US$ rally. Can you? Because, if so, then please explain your rationale to this humble technical analyst.

Here are the technical levels I’m watching on Gold charts at the moment.

Gold 4hr: My TC signal has spiked up to 400 pips and note how the 50% and 61.8% fibs were key levels along the way. The key $1,300 is just above current price action now. Price is above the 4hr Cloud:

Gold4hr Gold4hrCloud

Gold daily: the impact of this four month $100 trading range is more obvious on this time frame. Price action is back above the 4h Cloud:

GoldDaily GoldDailyCloud

Gold weekly: Price action is getting back up near a key S/R area BUT note how it is already back above the weekly Ichimoku Cloud. Any break and hold above the $1,300 level would bring the following areas into much greater focus.

  • The 5 year bear trend line.
  • The weekly chart’s swing low 50% retracement fib near $1,415.
  • The weekly chart’s swing low 61.8% fib near $1,500.
  • The weekly chart’s swing low 78.6% fib near $1,600. (Note: this is also an important fib on the monthly chart shown further down in this post)

GoldWeekly GoldWeeklyCloud

Gold monthly:  The monthly chart shows how price action is getting up close to the long term bear trend line. Any break and hold above this trend line would be significant as it would suggest a shift in polarity for Gold from being bearish to being bullish. A rejection of this $1,300 level though would have me looking for a potential move back down towards the 2015 LOWs near $1,000.

The other important chart to note here is the monthly Cloud chart though as on this chart I have drawn the fib levels to chart this latest recovery move in Gold’s price action. There are two key items to note on this chart:

  • Firstly, the monthly Cloud kicks in just above the $1,300 level and so this could create choppy price action IF price actually makes it up that far.
  • Secondly, note how the 61.8% fib of this recovery move is up near the $1,600 level. This is the level I would target for any break and hold above the 5 year bear trend line.

GoldMonthly GoldMonthlyCloud

Summary: The current economic conditions seem likely to help keep Gold supported. Watch for how the metal reacts at either of the $1,300 or the 5 year bear trend line levels:

  • A bullish breakout above these regions would have me watching up towards the $1,600 level.
  • A bearish retreat from these regions would have me watching for a move back to the $1,000 level.

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