Hello traders ! Last week was indeed one of the most volatile weeks for gold market that we have witnessed. In our last analysis, we expected a correction of gold from 1452 down to 1400 or even lower to 1370-1380. We were aware of the fact that the conclusion of the FOMC meeting would have no bullish impact for gold as FED was widely expected to cut 25 bps of interest rate. Indeed, gold dropped to 1400 after the announcement of the FOMC meeting and Powell’s press conference. It looked like gold would take out the 1400 level and dip down to our final target at 1370-1380 until Donald Trump showed up with his twitter thing. Out of the blue, President Trump announced on his twitter that the U.S will impose 10% of tariff on additional $300 billion Chinese products starting from September 1st. Gold market exploded after the news. Gold price went straight up from 1400 to as high as 1475.
Like we mentioned in our last analysis, there might be a spike to a higher high than 1452 as long as 1400 holds. That spike would be due to an unexpected news such as 50 bps rate cut or some extreme political event. And there it was, the unexpected news came from Trump’s announcement of additional tariffs on China. That has changed the picture of the gold market in short term. After taking out 1452, we do not see any strong resistance above that level until 1485. Please take a look at the above 4-hour chart. Gold broke out of the consolidation triangle that has been formed in July. The target of the triangle pattern breakout is at 1485. If you turn to weekly or monthly chart, you can see that this 1485 level is also the 50% Fibonacci retracement of the down leg from all time high at 1920 down to the bottom of 2015 at 1045. Therefore in short term, we think gold might head to at least 1485 until it finds some resistance.
So we have our short term target at 1485. Now let’s turn to our intermediate term outlook. Please take a look at the weekly chart above. You can see gold has broken out of the bullish flag on the weekly chart. If we calculate the flag pattern target, we can see the target at 1600. And if we draw the Fibonacci retracement from 1920 to 1045, its 61.8% level is at 1588. Thus, we think the intermediate target for gold is somewhere between 1588 to 1600 level. If we take into account all the trade wars tensions, currency wars, Brexit and rate cuts, we can see that gold may run into a parabolic rise from this level to our medium term target at 1588 to 1600. We were expecting a low price under 1400, desirably at 1370 or 1380 but we did not get it. However, the upside still remains big if our target is $100 to $150 more from here. Of course, nothing goes on a straight line so we would expect some ups and downs along the way but the general trend is up and we would want to buy on dips until we achieve our target.