Gold price: channel breakout or double top?
It is sometimes difficult to anticipate patterns to trade, but price action around gold is looking as though either one or another pattern could develop.
IGTV’s Jeremy Naylor looks at the potential for a near-term channel breakout, with a price target of a new record high, or a longer-term retracement that may then develop into a drop out of the bottom of a double top. Either way, measuring the recent channel gives the potential price target to aim for.
(AI Video Transcript)
Trading opportunity for gold
In this video we discusses a possible trading opportunity for gold, which is currently at a critical point in its price movement. We look at the long-term gold chart, specifically focusing on the highest point reached on May 3rd, which was 2082. The question now is whether this high forms a pattern called a double top or if it will break out to even higher levels.
Levels of support and resistance
To analyze this, we draw lines on the chart to mark levels of support and resistance. The support line is at 1931.5, which previously acted as a point of resistance, and the resistance line is at 2009.5, where the market pulled back. Recently, the market tested the support line at 1931 and then rose again. If this is indeed a double top, it suggests that the market may move downward and establish a new support line at 1931. If the price breaks below this level, it could potentially drop further to 1854.
However, if there is a breakout and the price closes above the resistance line at 2009, it would indicate a possible opportunity for a long trade. Traders would enter a long position, with a stop placed below the 2000 level, aiming for a new all-time high around 2100.
The US dollar
Keep an eye out for an upward breakout. The timing of this breakout may be influenced by the strength of the USD, which is currently not weakening. Traders should stay updated on any new developments in the coming days. If the price closes above the resistance line, it could be a good opportunity to go long. On the other hand, if the support line is broken, a short trade can be considered, with the stop placed just above the resistance line.
Overall, this trading idea is still evolving, but it presents a potential opportunity in the near future. So, it's important to stay alert and watch for any signs of a breakout or breakdown in the price of gold.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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