The large time frame of the gold price chart can partially confirm the technical pattern of prices returning to previously broken resistance levels. Over the past two years, the gold price has formed three local highs, which it has not re-tested yet. These are the levels of 2,100, 2,450, and 2,800. The possibility of quotes going back increases with every new untested price extreme.
The rise in the market price of gold against the US dollar was primarily driven by inflation acceleration following COVID restrictions, meaning that the US currency depreciated sharply against the precious metal. In other words, it wasn't so much that gold was rising in price, rather that the dollar was getting weaker. In addition, the greenback depreciation is in itself a reason for capital flows into more stable assets, including gold.
Speaking about the technical patterns of financial instruments, such unrelenting growth of prices will end sooner or later, and there will be an inevitable correction.
To determine the most probable target of the correction, the mentioned price levels, where local highs were formed, are exactly the ones to be used. The probability of price returning to the most recent maximum of 2,800 is the highest.
The scenario of further rampant growth is to be considered, and it is difficult to say where the growth can stop. Bearing this market risk in mind, one can attempt to use the current situation, while taking into account the discovered patterns, and open a medium-term position to sell gold.
The overall recommendation is to sell gold.
Profits should be taken at the level of 2,800.0. A Stop loss could be set at the level of 3,200.0.
The volume of the opened position should be set in such a way that the value of a possible loss, fixed with the help of a protective Stop loss order, is no more than 1% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
