Gold's Inverted Head-And-Shoulders Pattern Suggests $2000+ Is Next Upside Target
Chris Vermeulen | Sep 09, 2021 04:18PM ET
After a moderately strong rebound from the $1,675 lows in early August, gold has clearly started to set up the right shoulder of what appears to be an inverted head-and-shoulders pattern. The recent weakness in the U.S. dollar suggests any breakdown in the dollar below $91.70 will likely prompt a new bullish price advance in gold targeting highs above $1,900 and likely attempt to reach $2,100 or higher.
Watch $91.70 On U.S. Dollar For Next Gold Rally
Currently, the U.S. dollar is experiencing a few days of upward price trending after breaking downwards from highs near $93.70. Recent lows in the dollar, near $91.93 suggest a peak in the dollar may have set up. We believe the $91.70 level on the dollar is critical to the setup of the inverted head-and-shoulders pattern in gold and that gold may trail downward to levels near $1,775 before finding real support for the next upside price rally.
Once that right shoulder has completed, likely near $1,775 or higher, the next phase for gold is a very solid upside price rally that should rally above $1,845 fairly quickly and attempt to reach the $1,920 to $1,950 level before the end of 2021. Many of you are familiar with a head-and-shoulders pattern and understand the end of this pattern usually prompts a rally equal to the left shoulder or head breakdown range. This means the next rally phase for gold will likely be a minimum of +$150 to $+165 from the right shoulder level.
Strong Upward Support Near $1,765 Suggests Rally In Gold Is Pending
Additionally, we wanted to highlight this gold monthly chart pattern that suggests a strong upside price channel and a double-bottom continue to confirm a very strong potential for an upside price rally in gold. The CYAN upward sloping price channel suggests gold will find a strong support near $1,765 and the double-bottom suggests gold has already confirmed a strong support level near $1,695.
We believe the transition of the U.S. dollar throughout the end of this year will be key to understanding the type of rally we should expect in gold and precious metals. Once the U.S. dollar falls below the $91.70 level, the upside price pressure in precious metals should begin to accelerate. We believe the $91.70 level in the dollar is the key catalyst for gold to break out of this inverted head-and-shoulders pattern.
Get The News You Want
Additionally, a weaker U.S. dollar will begin to shift how capital is deployed in the U.S. equities markets and foreign markets. If the dollar breaks downward, below $88 or $89, then we may begin to see a shift of capital into foreign or emerging markets. But as long as the dollar stays above these key levels, the equities markets are likely to continue to attract foreign capital and continue to attempt to trend higher.
As this inverted head-and-shoulders pattern continues to trend through the right shoulder, miners may begin to rally ahead of the upward price trend in gold. It will be interesting to see if traders are anticipating this right shoulder breakout ahead of it actually completing. If so, miners may begin to rally two to three weeks before gold really starts to rally away from the right shoulder.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.