Gold Forecast: Gold Markets Continue to Build Bullish Flag

Christopher Lewis

There are still much more pressures underneath to push this market higher than there are above.

Gold markets have fallen during the trading session on Thursday but remain within the basic consolidation area that we had been in for a while, suggesting that perhaps we are trying to digest some of the previous parabolic behavior. That of course is a good look for the market, as it suggests that we are going to eventually break out to the upside. When you look at this chart, it does not take a lot of imagination to see a bullish flag.

I do like the idea of trying to buy gold for a longer-term investment, as the bullish flag could potentially measure for a move all the way to the $2000 region. That does not mean that we get there overnight, nor does it mean that it is going to be easy to get there. That is certainly not going to be the case, but you should also pay close attention to the fact that interest rates are not keeping up with inflation, and that is typically very good for the gold market. Furthermore, there is a certain amount of fear out there, and that helps the idea of gold going higher. Because of this, it is crucial that you pay close attention to the psychology of the market and ignore the fact that the US dollar and gold have been going up at the same time. While that is not the most common of correlations, it is possible and was the norm more often than not during the 1980s.

The size of the candlestick is only about half the size of the bullish candlestick from the previous session. This tells me, at least in the very short term, that there are still much more pressures underneath to push this market higher than there are above. There is no need to over think this situation, it is simply a matter of following the overall momentum, which has clearly been to the upside for some time. Looking at this chart, I have no interest in shorting, at least not until we break down below the $1835 level, which is an area that we had seen a lot of resistance at previously. I do believe that as long as we can stay above that area, we are fine. However, if we break down below there, I need to reassess the situation.

XAU/USD

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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