July 6, 2022
  • July 6, 2022

Are the Gold Bulls back in the driver’s seat?

By on April 22, 2021 0

Gold Price Talking Points:

  • Gold prices have made a strong move so far in April, highlighting the potential return of bullish price action.
  • Gold prices were mired in an 8-month pullback, taking the form of a bullish flag with a 38.2% Fibonacci retracement of the previous bullish move. After a double bottom built in March, could the bulls restart this uptrend?
  • The analysis contained in the article is based on Price action and graphic training. To learn more about price action or chart patterns, check out our DailyFX Education section.

It’s been eight months for the Golden Bulls. The yellow metal peaked on August 7e last year, just on the heels of a meteoric race aided by a cowardly but aggressive Central Bank policy. Gold prices entered states of deep overbought, but just kept pushing up, knocking out the psychological 2k level for the first time and soon setting a new all-time high at $ 2,075.

But, the same day this new historic record also saw the construction of a bearish engulfing candlestick on the daily chart. And as strange as it may sound, when writing the forecast for this weekend, I pointed out that a pullback could finally be brewing given the reading of this bearish abyss.

And now here we are, eight months later, and that peak of last year seems like a long way off. In the period that followed, this pullback in gold began to take the form of a reversal, with aggressive short-term price action manifesting as gold prices pushed lower. But, as I discussed a few weeks ago, in hindsight, those eight months of pulling / rewinding can be characterized as corrective action in what could be a longer term trend.

On the weekly chart below, I focus on this pullback and notice how it has so far taken the form of a bullish flag formation, which would also indicate the possibility of longer term bullish behavior here.

To learn more about bull flag formations, check DailyFX Education

Weekly Gold Price Table

Graphic prepared by James stanley; Gold on Tradingview

Gold forecast
Gold forecast

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Broken gold neckline of the double bottom

As we saw a few weeks ago, this tide started showing signs of a reversal when the March price action saw the formation of a potential double bottom formation.

A double bottom can be approached with the aim of bullish reversals, motivated by the assumption that the low price of the rejection may lead to a further influx of bullish price actions. These formations are often followed by looking for a break in the neckline, or the high price between the two low prints, in the effort to look for a bullish reversal.

This has been shown so far with gold prices surpassing the formation cleavage and continuing to push towards the psychological level of 1800.

To learn more about the double bottom training, check DailyFX Education

Daily Gold Price Table

Daily Gold Price Table

Graphic prepared by James stanley; Gold on Tradingview

Can Gold Bulls Start A New Trend?

Now that gold prices have put in some strength to close this double bottom, the big question is whether the bulls can continue the movement to create a new trend in the near term.

On the table below, I added a Fibonacci retracement on the pullback movement, going from last August high to recent March low. Yesterday’s support showed up around the 23.6% retracement of that move, and the double bottom neckline remains in play for lower support potential.

To learn more about Fibonacci, join us DailyFX Education

Four Hour Gold Price Chart

Four Hour Gold Price Chart

Graphic prepared by James stanley; Gold on Tradingview

— Written by James stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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