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Thread: Gold likely to reach US$1,800

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    Default Gold likely to reach US$1,800

    CHARTPOINT

    Gold likely to reach US$1,800

    Mon, May 11, 2020

    Jerome Lee


    WITH most countries around the world still in an extended lockdown as part of a systemic measure to prevent the spread of Covid-19, the novel coronavirus has made its mark as the single most disruptive global event in recent history.

    The struggling economy has led to loss of jobs, highlighted by the 3.1 million jobless claims in the US in the week of May 7, 2020. While the number has decreased compared to previous weeks, it is still larger than any that has been reported in this current millennium.

    This resulted in gold prices resuming their upward trend as turmoil and economic gloom continue to pervade most industries, causing investors and retailers to continue seeking safe-haven assets in a bid to shore up their risks.

    With gold being the most traditional and popular choice, we expect that gold is poised to move higher on further waves of uncertainty especially if the estimated US non-farm payrolls figure of -21 million for April 2020 is any indication.

    Moving on to the technical charts, gold prices have continued on their upward move in the early part of April 2020. Following this, the price of gold has begun moving sideways, forming a pennant chart pattern.

    A pennant chart pattern is a continuation pattern where a breakout precedes a period of consolidation within two converging trend lines. From the four hourly charts, we can see that since mid-April 2020, gold prices have been moving sideward, steadily creating lower highs and lows between US$1,746 per ounce and US$1,658 per ounce. This is a clear sign of price consolidation.

    On closer inspection, from the final week of April 2020 to the point of writing, there are signs of a smaller pennant chart pattern forming within the larger one. Although this smaller pattern could be interpreted as an early preceptor to gold prices continuing their upward move, a more definite indication is when the price of gold can break out of the larger pennant chart pattern.

    From there, if we were to apply a Fibonacci extension, using the recent low during mid-March 2020 to the recent high formed in mid-April 2020, we would be able to predict the next potential resistances.

    A conservative next resistance level could be around the US$1,772.00 per ounce price level as there is a confluence with a previous resistance level. Should gold prices continue their upward strength from that point onward, we might likely see the price of gold test US$1,800 per ounce.


    The writer is senior strategist at Phillip Futures

    Disclaimer: Chartpoint is provided by Phillip Securities Research for information only, and should not be construed as investment advice.
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