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Gold Forecast: Tired at Extreme Heights

By Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
  • As I review the gold market for the trading session, it's been quite volatile.
  • Given the recent significant rally, it makes sense to see some pullback.
  • This correction is a natural part of the market cycle, and while I anticipate continued bullish pressure in the long run, it's important to recognize that momentum has its limits.
  • Markets need to breathe at times, as the momentum will give way to profit taking, and then attract those looking for value in the gold market.

It's worth noting that the relative strength index has broken above the 70 handle, which is the overbought level. And the gold market has broken, at least earlier in the session, above the $2,660 level. While this is a very bullish market, and I think there are a plethora of reasons why we go higher, it desperately needs a pullback. Speaking of those reasons of why we should go higher.

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So Many Reasons for Strength

I think the first thing is the Federal Reserve cutting interest rates, right along with the ECB and several other central banks such as Switzerland, Canada, etc. So, at this point in time, gold will continue to be attractive over the longer term. Then, of course, we have a lot of geopolitical tension around the world. For example, in the Middle East with the conflict now spilling into Lebanon, and of course we have the war in Ukraine.

Gold Forecast Today 26/9: Tired at Extreme Heights (graph)

So, it all ties together perhaps for people looking for safety. And then finally, you have central banks across especially the Eastern world buying quite a bit of gold in the form of Russia, China, India, and a few others that are suspected to be doing the same with all of this and the technical analysis looking so bullish, I think any pullback towards the $2,600 level would attract a lot of value hunting.

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Christopher Lewis
About Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
 

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