The precious metal caught an upside break at the end of last week, pushing past its previous triple-top pattern. That culminated in a break to fresh record highs above $2,500. And that is where we are seeing price continue to hold so far this week.
There was a bit of a challenge yesterday but buyers are not letting up just yet. So, what does this mean for gold from here?
Personally, I continue to wish for a stronger correction to the run higher in gold this year. There was some bit part consolidation from mid-April to June. However, there hasn’t been any real pullback or retracement to the surge higher in gold otherwise.
That’s my only qualm, that being a technical correction might be overdue for gold. But even so, it would just present another opportunity to reload on longs when taking a structural view.
With the Fed on course to cut rates and the dollar starting to feel the pinch of lower rates, the outlook for gold remains very much bullish.
Fed chair Powell is likely to almost confirm a rate cut for September at Jackson Hole this week. All else being equal, markets should also converge towards a 25 bps rate cut instead of a 50 bps move in the weeks ahead.
However, that doesn’t mean that gold will be stumped. The latest jump since Friday is largely driven from a bout of dollar softness. And that comes despite the readjustment in market pricing sine last week. So, there’s that.
But when you consider the structural view, it’s tough not to be convinced of a continued run higher in the next one to two years at least.
For now, the breakout looks to be stalling near $2,500. However, it won’t take much to reignite the flames and even if there is profit-taking to see price pull back lower from here, it will be a case of buying the dip for gold.
This article was written by Justin Low at www.forexlive.com.
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