Gold has staged a major breakout above key resistance overnight, specifically the technically important $1,830 resistance level. This key technical area has been a price zone that gold bugs have not been able to break for months, and now it’s broken, gold price is looking higher.
Numerous technical rejections from this area, denoted by a key falling trendline on the monthly time frame have traders watching this area closely. Further gains towards $1,870 and $1,930 are now very plausible.
Gold price briefly disconnected from the price action in the Treasury yields on Wednesday but has returned to its negative relationship with the US rates this morning as bulls consolidate around $1,850.
China’s policy easing driven risk-on mood also limits gold’s gains for now. Although decade-high inflation rates globally have gold bulls excited, while the Russia-Ukraine crisis also helps keep the buoyant tone intact around the safe haven.
The yellow metal has arguably benefitted from early-year seasonal trends in 2022, i.e. Chinese new year gold buying, which is only going to accelerate as the holiday season approaches.
Bitcoin’s weakness is also bullish for gold. Many people may have bought their relatives Bitcoin last year. But with BTC falling, and gold rising, speculative bets towards gold seem to be back more attractive.
The current sentiment metrics towards gold show that traders are becoming more bearish. The ActivTrader market sentiment tool shows that only 38 percent of traders are bullish towards gold.
This bullish sentiment bias towards gold suggest that gold can still rally, as traders really aren’t that bullish towards the metal, which is typically a great sign. I have been waiting this sentiment metric to flip to negative, meaning that retail traders are getting it wrong.
Gold short-term Technical Analysis
The short-term technicals for the yellow metal show that a large head and shoulders pattern has been invalidated, following the recent price move above the $1,830 level.
Looking at the four-hour price chart, the $1,830 resistance level is so important because it is the top of the bearish pattern, and the invalidation points towards a coming move towards $1,870.
Gold Medium-term Technical Analysis
The daily weekly chart shows that gold still remains a buy this week while trading above the $1,800 level. Please be aware a big drop is possible if gold losses the $1,800 level.
If bulls move the price above the $1,880 resistance level then we could see a mega move higher, due to the fact a much larger bearish pattern will be invalidated.