After an incredible 40%+ surge in the price of gold during the coronavirus pandemic earlier this year, the yellow metal has fallen roughly 15% in value. However, with the traditional seasonal rally coming up gold could be in hot demand.
Technically, gold formed a descending triangle formation with a series of lower highs from August as shown by the blue line. After several rejections on the way down, price tried to break out in November only to fail and come back inside the triangle pattern.
Interestingly, the price of gold has now broken through the bottom of the triangle pattern as shown by the black horizontal support line at around 1,863. While the price has since rejected the same level to the downside, momentum has been limited, suggesting a false breakout back to the upside could be likely.
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Source: Admiral Markets MetaTrader 5, GOLD, Daily – Data range: from Apr 6, 2020, to Dec 11, 2020, performed on Dec 11, 2020, at 7:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
Last five-year performance: 2019 = +18.31%, 2018 = -1.60%, 2017 = +13.17%, 2016 = +8.55%, 2015 = -10.30%.
If the price of gold manages to break back above the resistance line of 1,863, it also coincides with a break of the descending resistance line in blue. A significant close above these levels could bring bulls back to the market in line with a possible end of year rally and traditionally bullish start to the year for precious metals.
A move back to gold’s all-time high price level of around 2,064 means a break higher could represent a 15% move up from the November lows.
- Learn more about commodity trading in the ‘How to Start Commodity Trading’ article.
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