Where is Gold Heading?

 

Gold is often seen as a hedge against inflation

And with inflation being at an all time high throughout the world currently, gold should in theory be rallying. But has this been the case? And how could price be developing in the future?

Interestingly enough, gold has not really rallied in 2022, except for February and March with the onset of the Ukraine conflict. Since then it had lost 21% value until it bottomed out at around $1600. This is a very similar movement from 2020 when the Pandemic took hold; but price also dipped back by 19% in 2021.

All in all, this is what we would expect gold to do: rally in times of uncertainty as gold itself is thought to be "stable". Of course that is just an idea as well, as "you can't eat gold" and therefore its value is highly symbolic.

There is a current rally which started in October and has sent gold above $1800 again. Can this momentum be sustained? One recent news I read that China seems to be buying a lot of gold in recent and has been revealed to be the "mystery buyer" on the global gold market. Perhaps this among other news events has triggered the recent rise.

The lows of about $1600 could have been anticipated by drawing a trend line connecting the bottom of the recent price movement. If we do the same for the top, we get a sideways moving channel. Price runs in such a channel until there is a breakout to either side. To understand which side is favored, we have to look at the bigger picture.

On the monthly chart we can see the movement form the 00s onward. There is a salient supporting trend line which has also anticipated the $1600 support. Since this is a 20+ years trend line it is fairly strong and we can expect price to hold. There is also another sideways channel here seen in red:

This channel could indicate a price decline to about $1100, but in order for that to happen, the other trend line would first have to fail. Let's zoom out some more!

Here we can see price since the late 60s and we can draw some interesting trend lines:

The whole price movement is apparently trading in an ascending triangle of which there are subwaves of about 30 years. To make this clearer, we can draw some rectangles:

10 year bull cycle then 20 years bear. This repeated one more time from 00 to 10, but I wonder if the bear will last 20 years again since we have had a higher high in the supposed bear. To me this signals that the bear market is invalidated, since we do not have higher highs in that phase. Therefore I would not expect price to be in the bear phase until 2030.

I rather suspect that price will break out to the top within the next years. To give us a rough estimate of where price could be heading we can use the fib retracement tool:

This would suggest a price of at least $3000 in the next years. That would mean that price wpuld break through the top resistance and will likely retest it. Two possible scenarios could look like this:

$3000 could be reached in the next 2-4 years. The question then is: will price bounce off to even higher highs or retest the macro support line at around $1600?

Note that we can also draw a different top trend line which would intersect the $3000 range perfectly:

 

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