Gold, XAU/USD Talking Points:
- Gold held a higher-low last week and bulls remained active through yesterday’s close.
- But so far today gold is pulling back after testing and failing to drive through a fresh near-term-high.
- I’ll be looking into these setups in the Tuesday webinar and you’re welcome to join, click here for registration information.
I spent a long time looking into gold in yesterday’s webinar, and in the prior webinar week ago, I had highlighted higher-low support potential at 2381. In yesterday’s episode the quandary was the $2,500 psychological level, which hasn’t yet come into play in spot gold. But given proximity from recent highs this appears to be a level that’s brought impact without actually having traded yet.
The US CPI report this morning brought a quick breakout to a fresh near-term-high, holding just inside of the prior swing high that set in July. And shortly after, sellers came into play although this was likely driven by profit taking from buyers that had ridden the move higher over the past week.
There remains bullish structure in gold and the 2431 level is the next price on my radar. This was the high in April and it’s had multiple iterations of both support and resistance since, most recently helping to hold the high to close last week.
Gold (XAU/USD) Daily Price Chart
Chart prepared by James Stanley; data derived from Tradingview
While this reaction to CPI and a run of USD-weakness may be disappointing to gold bulls, the bigger picture still doesn’t look bad.
Even after the massive breakout in March and April, prices haven’t really pulled back all that much and for the past few months, there’s been a build of a bullish channel. The problem as I see it is that $2,500 level, which is a major psychological level, somewhat similar to the $2k level that held the highs in gold for more than three years before that breakout earlier in the year.
From the below weekly chart, we can see buyers continually shying away from a test of the big figure. But there’s also been an inability for sellers to push anything more than a moderate pullback thus far.
Gold Weekly Price Chart
Chart prepared by James Stanley; data derived from Tradingview
Gold Big Picture
The impact of $2k was clear since the summer of 2020. At the time the Fed was pedal-to-the-floor with stimulus and the US Dollar was getting sold at a brisk pace. But this mattered little to gold as the metal couldn’t gain acceptance over the $2k level. We can even span back to 2008 to look at the metal’s push over the $1k level to see something similar, where in March of that year, as Bear Stearns was getting hit, gold put in its first ever test over that level.
And despite the worry at the time gold then pulled back by more than 30%. The next test of $1k again saw failure a year later, and it wasn’t until September of 2009 that gold was finally able to trade above the big figure. And once it did – it flew higher for much of the next two years.
The $2k level presented similar challenge with resistance holding for more than three years and once price was able to push above (with support in January and February of this year), it was free to fly-higher and that brings us to current levels.
Gold Monthly Price Chart
Chart prepared by James Stanley; data derived from Tradingview
Gold: Minor Psychological Level and the Prospect of Pullback
While the major psychological levels looked at above have had obvious impact, there’s also been some interesting items showing at minor psychological levels of $2,300 and $2,400.
The initial breakout in April wasn’t able to hold $2,400, indicating a lack of acceptance after a massive run. And a run like that would normally drive some profit-taking, but even that was short-lived as sellers continually failed to gain acceptance below $2,300.
I look at that as market participants coming in to defend the minor level after a pullback – which then prodded another test of $2,400 and this time, bulls failed right at $2,450 (another minor psychological level).
The pullback from that, again, held a higher-low as sellers failed to gain acceptance below $2,300, and that largely held through the end of Q2. And then in early-Q3 trade, bulls went right back at it, setting a fresh all-time-high but failing just shy of the $2,500 level.
In my opinion, that remains the ‘big deal’ for gold. But – just as I said in the webinar last week when lining up the higher-low, timing is still of importance.
On the other side of the matter, we can see increasing acceptance of the $2,400 level – not only from the continued breaks above but from the pattern of higher-lows that have built closer and closer to that price. That becomes a big spot to watch for support on continued pullback plays. Along the way, the $2,431 level that was the swing-high in April is setup for support potential.
The bullish channel that’s built over the past few months remains in-play but given the fact that this channel has held even after a massive breakout, and bulls still have an open door to push for fresh highs.
Gold Daily Price Chart
Chart prepared by James Stanley; data derived from Tradingview
--- written by James Stanley, Senior Strategist
