Gold Price Forecast: The Week Ahead And Beyond

As a rule of thumb, our contributions deal with the long-term gold price path. As an exception for today though, we’ll deal with the profitable (at least for our subscribers right now) short-term setup just ahead. The starting point is today’s gold futures action. Let’s get right into it, as it will let us present you, the gold investor, with an upcoming gold upswing target.

So, what is gold doing right now?

It’s more important to say what gold is not doing. Gold did neither move below the rising short-term support line, nor did it manage to break below the 61.8% Fibonacci retracement level despite a few quick attempts. This means that the very short-term trend remains up. Today’s pre-market decline might seem discouraging, but it’s well within what can be viewed as normal.

Again, we did not see a breakdown below the key short-term support levels in gold, so it’s likely to move higher once again. Based on what we wrote earlier today, it’s likely to do that soon.

Interestingly, the USD Index formed a major immediate-term reversal candlestick, which was followed by a clear invalidation of the breakout above the mid-November high. This is an extremely bearish combination for the very short term (and for the very short term only). The USD Index seems poised to decline in the following hours and – perhaps – the next few days, which means that gold is likely to get a very positive boost shortly.

Again, that’s in perfect tune with what we wrote previously, which makes the bullish case (only for the short term) for gold even more so confirmed.

The very short-term gold chart helps to confirm our previous gold price prediction – namely, that gold will attempt to rally to $1,500, but that it could reverse before reaching this level.

Based on the 1.382 multiplicator applied to the recent short-term upswing, gold would be likely to rally a little above $1,490. Based on the upper border of the rising trend channel, gold would likely top after moving either close to $1,490, or a little above it, depending on when this border would be reached.

Why would the 1.382 multiplicator be important? Because it’s yet another use of the Phi number on the gold market (1.618). Long story short, this number is ubiquitous in many places in nature, and since people are part thereof and they are active in markets, perhaps it would be present in the market movement. It turns out that it is indeed present, and it quite often works remarkably well as a tool to detect support or resistance levels. At times, it can be used to make forecasts by multiplying one of the previous moves by 1.618 or another Phi-related number (such as 1.382). And, well, it tends to work quite often, despite there being theoretically no specific reason (other than mentioned above) why 1.618 or 1.382 should work, and not 1.792 or 1.123 or any other random number above 1.0.

Since both very short-term techniques: the upper border of the rising trend channel and the Phi-based target point to similar price level, and the same goes for other gold trading techniques that we didn’t cover today, it seems that gold will top relatively soon, in the proximity of $1,500, quite likely close to $1,490.

Summary

Summing up, gold keeps holding up at supports, and the USD Index situation favors an upcoming precious metals rally in the days ahead. This is also confirmed by the 1.382 multiplicator applied to gold’s recent short-term upswing.  The upcoming gold top is likely to happen quite soon and around $1,490.  To be honest, this will likely conclude the counter-trend rally within a huge downswing, though.

In other words, while this might be the case this week, the following months are not likely to be pleasant times for anyone who refuses to jump on the bullish bandwagon just because prices moved higher in the previous months. But what’s profitable is rarely the thing that feels good initially. Forecasting gold’s rally without a bigger decline first is likely to be misleading. The times when gold is trading well above the 2011 highs will come, but they are unlikely to be seen without being preceded by a sharp drop first.

Naturally, the above is up-to-date at the moment of publishing and the situation may – and is likely to – change in the future. If you’d like to receive follow-ups to the above analysis, we invite you to sign up to our gold newsletter. You’ll receive our articles for free and if you don’t like them, you can unsubscribe in just a few seconds. Sign up today.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits - Effective Investments through Diligence and Care

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All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.