Gold weekly forecast: all about Greenland

US index futures were set to drop at the Asian open with gold likely to gap higher after US president Trump at the weekend vowed to impose a 10% levy on goods imported from eight European nations until a deal was reached over the US to purchase Greenland. This is a developing story and will likely garner most of the attention on Monday. Against this backdrop of renewed geopolitical tensions, the gold forecast is likely to remain positive in the near term outlook.

Greenland news could trigger risk off

The US government intensified calls to take control of the autonomous Danish territory on national security grounds. Trump’s announcement has alarmed both European allies and those living on the island. Traders are likely to find more reason to buy gold as a result of this, unless Trump backs downs like he has done with many other threats in the past.

Fed chairman uncertainty

The other news that could move markets in the coming days is the uncertainty about the next chairman of the Fed. Gold managed to bounce back on Friday after prices initially fell more than 1.5% earlier on the session when Donald Trump hinted that the previous front runner, Kevin Hassett, may no longer be considered to lead the Fed. Instead, the odds of the second front runner, Kevin Warsh, who is now leading the polls, have increased. That shift helped to push the US dollar higher, and in response we saw precious metals sell off sharply with silver dumping more than 5% before bouncing back impressive to close the week. But now the news regarding Greenland is likely to overshadow anything related for the Chairmanship.

Gold forecast: Technical analysis

For now, gold has found good support from a former resistance area as highlighted on my chart. The top of the range sits around $4,550, which was the record high reached in December before the late-year sell-off. That level was later reclaimed and was always exposed to a retest from above, which we have now seen. So far, the reaction has been constructive, with the candle wick from Friday’s session suggesting buyers are still defending the bullish trend.

However, with the dollar rebounding, it is worth watching for any signs of trend fatigue. If the $4,500 to $4,550 support zone breaks at some point this coming week, the picture becomes more interesting. In that scenario, the gold spot prices could drift towards the grey shaded area, where prices previously had found resistance back in October before finally breaking higher. That zone also converges with the bullish trend line, making it a key area of potential support.

Anyway, gold appears to have re-established its bullish trend after a small shakeout. It may have opened the door to fresh record highs for early next week. Beyond that, there are no obvious targets, so keep an eye on round numbers like $4,700 and $4,800. There is also a Fibonacci extension from the previous major downswing that comes in around $4,687, which may act as a profit target area for Fibonacci-based traders.