INTERMEDIATE TERM TREND BEARISH/NEUTRAL
SHORT TERM TREND NEUTRAL
VERY SHORT TERM TREND BEARISH
Since making an all time high of 2077 in August, gold has been in a complex consolidation pattern that has taken the heat out of the price and seen the overbought indicators flashing across the board come back to neutral readings in anticipation of the next rally.
We think here is a still a little way to go with this consolidation, though it is possible that the macro scale rally can resume in December/January, traditionally a strong time of year for gold prices.
Ideally, we would like to see a test of the 200 day Moving Average, currently at 1784, before the rally resumes in earnest. This level also coincides with previous resistance from early summer 2020 and is now an area of strong support.
On a shorter time scale, gold sold off dramatically on Tuesday on the news of a COVID-19 vaccine being announced by Pfizer and so far has only recovered a fraction of those losses. The choppy nature of the action and lack of buying conviction suggests to us that further downside is likely, with strong support at 1850 the key area to watch. A break of this support is likely to see a sharp sell off towards our target of 1780.
Gold is now trading below the 50 day Moving Average, currently at 1909, and the 89 day Moving Average, currently at 1888. These levels provide resistance in the short term. The price remains above the 200 day Moving Average which as noted above is currently at 1784.
Equities continue to surge higher, fuelled by unprecedented amounts of financial stimulus and liquidity and record low interest rates and continue to make all time highs on a regular basis. Since jumping initially on the vaccine news, equities have pulled back a little but remain within striking distance of all time highs.
The Dow is currently at 29,200, less than 3% below the all time high of 30,093, and the S&P 500 is currently at 3,557, just 3% below the all time high of 3,674 set on Tuesday.
Following equities, oil sold off sharply in the first quarter of 2020, at one point trading into negative territory. Prices have recovered strongly since then and are now trading at around $42 a barrel with a strong bullish bias on the charts. We expect oil prices to recover further over the coming months, our initial target is $50 in the short term.
In gold, support can be found at 1857, 1848, 1830, 1817 and 1780. The recent wedge consolidation pattern is bullish for gold in the medium term time frame and suggests a move towards 2,100 early next year is becoming more likely.
Short term resistance can be found at 1884, 1888-90, 1900, 1909, 1917, 1932, 1965, 2000, 2016 and 2077. Gold needs to break the key resistance level around 1965 to give the bulls some renewed momentum and a move back towards the all time highs above 2000.