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Stock Watch

Gold – has the uptrend finally returned?

Gold is often seen as a ‘safe haven’ asset, especially at times of crisis. If investors remove their interests in falling stock markets and instead buy Gold, this can result in an increase in value. With tensions currently escalating between Russia/Ukraine, there could be a fundamental, as well as technical, reason to be looking for long opportunities in this precious metal commodity.

The price of Gold has recently broken through both a strong zone of resistance around $1830-1850 (horizontal levels shown in pink on the weekly chart below) and a consolidation triangle (shown in orange on the chart below). In fact, the price of Gold appeared to have been consolidating since the all-time highs of $2075 were reached in August 2020, so this breakout could be significant and spell the beginning of a return to the uptrend.

Price is currently sitting very close to the previous all-time highs from 2011 (marked in blue on the monthly chart below), and these highs were not achieved again for almost nine years, when they were finally breached in July 2020. The price remains significant as a potential level of resistance.

On the daily chart below, an uptrend is established, with higher highs and higher lows in price action, and the 10, 20, 50 and 200 MAs lined up and showing good bullish geometry. The MACD and RSI indicators show bullish convergence with price, indicating the uptrend could have some momentum behind it. Price is pushing up to the aforementioned resistance level from 2011 at around $1910, and if this level breaks to the upside there could be more opportunities to buy on the horizon. Once broken, a pullback down to the level and a small to medium sized bullish candle printing in this area could indicate the beginning of a further move up. It is possible that price could move up towards the next major level of resistance around $1960 and even beyond back up above $2000 if the uptrend continues.

An alternative view, should the $1910 level prove too resilient, would be a move back down to support around $1850. If this level holds and encourages buyers back into the market, a return to the uptrend could still be on the horizon.

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