The Euro has been attempting a long-term breakout since July 11, 2024. It may take a few weeks, or even months, but if it succeeds, gold prices will rise significantly.
Related – Will Gold Hit $3,000 an Ounce?
With gold prices remaining flat for around four months, more and more people are wondering where gold peaked.
In fact, we are firmly opposed to a scenario in which gold prices reach all-time highs, for a number of reasons.
The most important reason is that the long term chart of gold is very bullish, especially on the longer time frames like the 50 year gold price chart, even the 10 year gold chart looks very strong.
Gold is bullish at the highs, which means consolidation and selling at the lows is creating more noise than anything else. As I have said many times before, avoid gold news as it is confusing and misleading.
Gold Price Chart – Slow Upward Trend
If anything, the daily gold price chart (XAUUSD) is a beauty.
Yes, we have encountered resistance recently, but that is a short-term view.
The striking feature of the gold chart is that it is trending up. The gradual nature of this uptrend is not important because it is still trending up.
Gold prices – gradual upward trend, but with some breaks as the current rally continues
Gold Leading Indicators – Long-Term Breakout Attempts
As we explained in our gold forecast, one of the leading indicators for gold is the euro.
Gold is inversely correlated with the US dollar, so the euro is positively correlated with gold.
Below is a multi-year price chart of EURUSD, with annotations showing (a) the major Fibonacci levels and (b) the most obvious descending trendlines.
As you can see, on July 11, 2024, the EUR broke above both the descending trend line and the most important Fibonacci level (the 50% retracement level). This is significant. Very significant.
If the EUR/USD continues to rise, it will support the gold bull market thesis.
The EURUSD may decline in the short term, nullifying the breakout attempt that began on July 11, 2024, but it may also postpone the breakout. Therefore, even if the pair does decline, you should take a longer-term view on this EURUSD chart.
Gold Leading Indicators – Euro Breakout Will Be Bullish
Gold Leading Indicators – Speculators are too bullish
Conversely, there are too many speculators taking long positions in the gold market.
Below is the Managed Money Index (aka Speculators), which unfortunately has a high “long” value.
Gold Leading Indicators – Speculators are too bullish
Gold prices may need to fall a bit to scare off speculators.
Ideally, for gold prices to continue their bullish trend, there would be fewer speculators on the long side.
Therefore, for gold bulls to feel confident in a long-term bull market for gold, it would be best to see a decline in gold prices, reducing the number of long-side speculators, followed by a major long-term breakout in EUR/USD.
Our research suggests that both could happen between August and October 2024.
Read more in the latest Gold & Silver Research Report >>
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