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Gold had another huge week on the precious market after breaking the $1,880 level, which effectively caused strong technical buying that pushed the yellow metal above the $1,900 level.
A major move in the bond market and a sell-off in the DXY prompted the move. As I have mentioned frequently the price of gold is basically correlated in an inverted fashion to the greenback.
It is also noteworthy that demand for gold rose by 28% last year, primarily driven by a flight towards safer assets amid soaring inflation. A significant amount of this demand has come from central banks in recent months.
Going forward, if we see the price of gold trading above the $1,880 for a significant amount of time I would expect a test towards the $1,980 to $2,000 area this quarter.
A significant breach of the $1,880 area and I would expect the price of gold to crash quite quickly under $1,800 and then basically to recover with some gusto back to current levels.
Current sentiment metric towards gold shows that sentiment has become not so bullish, which still hints that retail are leaning towards more gains this week.
The ActivTrader market sentiment tool shows that 58 percent of traders are bearish towards gold. Going forward, we really need to see a much stronger negative bias by retail to help the chances of $2,000 being hit.
Gold short-term Technical Analysis
According to technical analysis gold the price of gold could head towards $2,000 as it continues to make bullish higher highs, with the metal feverishly being snapped up on price dips.
These type of pattern higher highs and lower lows often mark strong trends, although the MACD indicator does call for the metal to retrace as it somewhat overbought right now.
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Gold Medium-term Technical Analysis
The daily chart shows that the yellow-metal has broken the resistance at $1,877 would has activated a huge, inverted head-and-shoulders pattern on the daily chart.
Traders be warned that the mentioned bullish price pattern has a measured target of $1,975. In short, medium-term traders need to be positioned long or buy into pullbacks.
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