Gold Price Forecast: Spot Gold Breaks Through $2700

Gold Talking Points:

• Gold prices have set yet another fresh all-time-high with its sixth consecutive weekly gain.
• The 2024 trend continues to impress and pullbacks have remained rather shallow thus far, with strategy highlighted in yesterday’s article.

Gold has now taken-out the 2700 level and there’s been a minimum of resistance from sellers, so far. The trend that started in February has continued to forge-on and at this point, it seems that the profit-taking or counter-trend behavior is growing more and more brief.

After the Q1 breakout, a channel developed that showed a range for the next few months. But that was soundly broken through in mid-August as gold prices got comfortable with live above the $2500 level. At that point, resistance was showing at 2530 but it was the ECB rate cut last month that propelled the move-higher with another extension up to 2600 on the day of the FOMC rate decision that saw the Fed move into a cutting cycle.

While that 2600 spot did elicit a bit of resistance, the pullback was brief and shallow, with buyers piling back in after a test of the 2550 level, and then extending the trend once again until resistance finally started to play at 2685.

From that, another pullback showed but this time it was more brief than the episode in Q2 as the bull flag saw prices pullback for a few weeks, until the US CPI report last Thursday which, once again, drew bulls back in the move to push fresh highs.

It was the 2685 level that was in-play this week, holding the highs on Wednesday but, again, the pullback from that was brief and shallow, with buyers holding lows around the 2670 level.

And now, we have another fresh ATH after bulls have driven through 2700 for the first time ever in spot gold.

Gold Daily Price Chart

Chart prepared by James Stanley; data derived from Tradingview

Gold's 2024 Bullish Trend: From 2k Acceptance Through 2700

It’s been a massively bullish year for gold so far and at this point, daily RSI is pushing back into overbought territory; and overbought readings remain on both weekly and monthly charts.

But that’s not necessarily a new thing as monthly RSI has been overbought since April and weekly overbought has been in since early-September.

The bigger question is whether any of that matters? And, as I said a few weeks ago, I don’t think that it does, not at this point, anyway.

Working with such moves can be a challenge as a trend of this nature is driven by increasing demand and as positioning in the market gets more and more one-sided, there’s fewer bulls left on the sidelines that can come in to push fresh demand and higher prices. But, that also doesn’t mean that the trend is over and if near-term momentum is any guide, there’s still potential for continuation.

The bigger challenge is going to be risk management as prices have moved far away from any nearby supports, making stop placement either a guessing game or something where traders would need to take on far more risk exposure than they otherwise might want to.

So, with these scenarios, traders have a couple of options to work with the trend-side move:  They can either look to work with breakouts, which would require some rigid risk management protocol to offset the fear of ‘buying a top.’ Or they can try to wait, as I shared in the video yesterday. The wait doesn’t necessarily have to be long, but it will be market dependent, as traders look for support to show at prior resistance, at which point the prospect of trend continuation can become attractive again. And at least at that point, there’s some reference for risk management. This, of course, doesn’t guarantee wins but at the very least it does allow for the trader to take a more risk-first approach in chasing an overbought trend, while also trying to avoid the dreaded situation of ‘buying a top.’

Paradoxically it’s when prices are at highs that the crowd appears most bullish. And then on pullbacks or tests of support, particularly in an overbought market and a well-aged trend, that they appear to be most bearish.

But, that’s been the optimum time for taking on exposure in gold of late, such as was seen in the aftermath of the FOMC rate decision last month; or around the US CPI report last week, or this week at pullbacks to support at prior resistance of 2670 and then 2685.

At this point, there’s the 2700 level that can present support potential if bulls remain very aggressive; and 2685 and 2675 remain of interest, as well. Below that, 2667 and even the 2650 level can be argued as a hold of that price would constitute higher-low support on the daily chart.

Gold Four-Hour Price Chart

Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Strategist