Where is Gold headed in the Long term?

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Gold investors, especially those dealing in USD, have faced a challenging period marked by consolidation and a stubborn resistance level at $2075. Let us navigate through the Gold chart, decipher patterns, and explore potential scenarios for gold’s future movements.

Gold investors have experienced frustration in USD terms since reaching a peak of $2070 in August 2020. The market has been in a prolonged consolidation phase, marked by peaks and troughs. Despite multiple attempts to breach the $2075 resistance, gold has faced setbacks, currently hovering around $1985. The historical context of this consolidation hints at the potential for a significant breakout when certain key levels are breached.

The chart reveals a series of attempts to surpass the $2075 mark, with false breakdowns and rebounds. The $1800 base now acts as a critical support level, and any move below this could signal weakness in the gold market. The inverted head and shoulders pattern, reminiscent of a similar setup from 2014 to 2019, suggests a prolonged consolidation phase before potential fireworks in the market.

Looking at the weekly basis, recent attempts to close above $2075 have been met with resistance, indicating the formidable nature of this level. The inverted head and shoulders pattern remains intact, with the possibility of further attempts to complete the pattern. Drawing parallels with historical consolidation phases, the analysis suggests that once the current consolidation is over, a substantial move of 50-60% may follow.

Comparing the USD chart to the INR basis, a different perspective emerges. The 2020 peak of Rs 5800 in INR has already been surpassed, currently sitting at 6100.

The chart displays a strong uptrend with higher highs and higher lows, signaling a positive trajectory. This divergence prompts questions about the influence of currency dynamics on gold trends and underscores the importance of considering multiple perspectives in market analysis.

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Alok Jain

Alok is the founder of weekendinvesting.com He is a veteran with over 25 years of experience in the India markets first as a member of the National Stock Exchange and in the last half a decade as a SEBI registered manager specializing in momentum based non discretionary portfolio strategies for retail investors. He is usually found on twitter at @weekendinvestng | The content in this article is purely the author’s personal opinion and is for informational and educational purposes only. It should not be construed as professional financial advice and nor to be construed as an offer to buy /sell or the solicitation of an offer to buy / sell any security or financial products. The views and opinions stated in the content belong to the author. WEEKENDINVESTING ANALYTICS PRIVATE LIMITED does not uphold nor promote any of the views / opinions. | WEEKENDINVESTING ANALYTICS PRIVATE LIMITED is a SEBI registered research analyst (Regn. No. INH100008717)

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