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Monthly Precious Metals Technical Analysis Report - May 2020

03 June 2020

Gold – In Brief

Gold spent much of the month trading in a narrowing pattern that resembled a pennant, which looked like a consolidation phase after the rapid recovery from the mid-March crash. Last week the price tested the break-out of that pattern and rallied higher, although failed to make new highs. If this break-out from the consolidation pattern follows past behaviour, then a rally to the high US$1900’s may unfold.

The principal drivers have been a deterioration in Sino-US relationships, a sharp decline in the Dollar index, rising unemployment and a contraction in economic activity more or less everywhere.
 

Where to from Here?

Gold is clearly bullish and has seen net inflows that are justified via an expansion of monetary and fiscal objectives driven by the economic contraction arising from COVID-19.

However, although the price is trading relatively close to recent highs activity, short-term action doesn’t feel particularly buoyant, perhaps because bullish markets ‘climb a wall of worry’.

Resistance

  US$1912      2011 high
  US$1864   Target on Hourly Point and Figure
  US$1802   Vertical target on Hourly Point and figure
  US$1765   Recent highs

Supports

  US$1712.00   Weekly Turning Line
  US$1608.50   Weekly Standard Line
  US$1440-50      Band of support November 2019, successfully tested March 2020
  US$1430   Major trendline support
  US$1345-75   Top of 2016-2018 range
 

Targets (Upside)

All target probabilities basis spot US$1,725 for 3 months
  US$1800      Hourly Point and Figure (0.30 % Log)   33%
  US$1864   Hourly Point and Figure (0.30 % Log)   22%

Targets (Downside)

  US$1668     Hourly Point and Figure (0.30 % Log)   32%


To read the full report in PDF format, please click here.