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Is the gold rally set to continue?

Gold prices have been soaring over the past week, yet with a major area of resistance ahead, will this trend continue or start to reverse?

Joshua Mahony JMahony_IG
Senior Market Analyst, London

Publication date : 2017-03-22T15:13:13+0000

Gold prices have climbed to a three-week high today, with fear spreading through the markets that we could see the Trump-fuelled rally unwind as, in reality, we may not actually see his widely-heralded business-friendly plans. This serves to build on what was a particularly strong week. However, with the price pushing higher once more, we look at whether this rally has legs.

The weekly chart below highlights the bounce we are currently experiencing from the psychologically important $1200 level earlier this month. This perspective takes out some of the noisy data seen in the shorter-term charts, with the last major swing low of $1195 looking like the level that will underpin this resurgence.

Gold weekly price chart

Gold weekly price chart

Gold weekly price chart

Looking at the daily chart provides us with a more granular picture, with the price currently challenging both trendline and Fibonacci resistance (76.4%). This gives us important detail, with the break below $1216 in early March providing a potential sign of weakness. Given that this was preceded by a higher high, the picture is somewhat murky until we either create a new lower high or higher high. That means we have to either reverse soon or break through $1264.

Crucially, given the wider perspective provided by the weekly chart, there is a good chance we will see a break through $1264, which would have significant bullish implications. Should that occur, a move towards the trendline resistance (currently $1300) would come into play. Alternately, should we reverse lower, it would likely come from this current resistance region, where a push to the downside would point towards a potential move back below $1195.

Gold daily price chart

Gold daily price chart

Gold daily price chart

The hourly chart completes the picture, with the price attempting to break through this major resistance zone. Clearly, we have seen a bullish triangle fail to really push through resistance, with a subsequent push looking like it will also fall short.

Should we fail to break through $1250, we could at least be looking at a retracement of the rally from $1227, with the $1235 Fibonacci and previous peak of particular interest. An hourly close above $1250 could spark another strong leg higher, but the key things here is whether we break through $1264 and the implications it would have from a wider perspective.

Gold hourly price chart

Gold hourly price chart

Gold hourly price chart

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