Skip to main content
//empty //empty

Gold’s rally has halted just below $2,000 an ounce partly due to fierce technical resistance, but an eventual break above that level is likely, freeing prices for more record highs, technical analysts said.

The gold price has surged 30% this year to an all-time peak around $1,975 an ounce and is one of 2020′s best-performing assets.

The rally was driven by a belief that gold will hold its value better than other assets as fallout from COVID-19 ripples through the global economy.

Story continues below advertisement

Central bank stimulus has pushed inflation-adjusted U.S. bond yields to record lows, making non-yielding gold more attractive, and the dollar has weakened sharply, making bullion cheaper for buyers with other currencies.

The never-before-reached $2,000-an-ounce mark is a major psychological resistance level, with gold’s 49-year trend channel resting just below it at $1,983, said Commerzbank technical analyst Karen Jones.

Only an end-of-month or, better yet, end-of-quarter close above these levels will signal a break from the channel, she said.

“Tighten your stops ... unless the top of my range is taken out in a convincing manner ... upside from here is marginal.”

Technical analysts seek patterns and signals in price charts which allow them to predict and interpret moves. Traders and automated trading systems also take prompts from technical signals.

Because gold’s rally has been so fast, a downward correction is likely and could be brutal, analysts said, before the market attempts another stab higher.

Early support is coming in around its 20-day moving average, at $1,875, and the bottom of its 4-month uptrend, around $1,830.

Story continues below advertisement

Below that is more powerful support at the 20-week moving average, currently at $1,755, said Tom Pelc, an independent technical analyst formerly at Nomura and RBS.

Such a fall wouldn’t necessarily doom the longer-term uptrend.

“We continue to see this improving volatility backdrop, so there’s no sign that the long-term trend is changing,” said Richard Adcock, a former UBS and now independent technical analyst.

“The market can carry on higher than people expect,” he said.

If resistance is broken, Fibonacci extensions offer short-term targets. These are based on the idea that a rally will extend in predictable proportions extrapolated from a previous rally. One is at $2,067, said Pelc, another comes in at $2,286.

That could only be the beginning of a multi-year move. Lucas ratios -- a tool using a sequence of numbers similar to Fibonacci’s -- suggest gold could rise to $3,598.80 an ounce in 4-5 years, said Pelc.

Story continues below advertisement

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Follow related topics

Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies