GOLD : Breakout Rally Soon ?

(Fri, 18 Sept 2020). Gold prices have been relatively stagnant in the last few weeks despite notable volatility in other markets. To be sure, gold has seen price activity, yet it is considerably more controlled than the swings witnessed in July and August and directional progress has been almost nonexistent. As a result, the precious metal has etched out a wedge from the lows of August to the peaks of price action shortly thereafter.

With weeks of consolidation under its belt, gold has coiled like a spring and is quickly running out of room in its technical formation, suggesting a break may be due. That said, the September FOMC meeting was lauded by many as an opportune moment, but price would suggest a failure to launch on the back of the central bank meeting. Thus, gold traders are left in search of catalysts after the fundamental groundwork for a continuation higher was arguably laid out by the Fed just a day ago.

Looking to the economic calendar for assistance, it reveals a notable lack of high-risk events in the week ahead which may see gold simply continue sideways instead of stage a volatile break higher or lower. While the longer-term outlook for gold remains constructive in my opinion, the current landscape seems to lack the necessary ingredients to stage a confident run higher.

While, a surprise uptick in risk aversion or continued USD weakness could help goad the yellow metal higher, I would argue these themes also lack the punch required for conviction. Therefore, gold may continue its gradual trip sideways while bulls look to hold above possible support around $1,921 in the shorter-term and $1,863 over the intermediate timeframe.

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