The price of gold lost some 3.5% in the month of June, and is somehow bearish. Some call for a breakdown of the secular uptrend which started in 2002. Although that may be true we take a deeper look into gold, and try to understand whether we have to revise our Gold Price Forecast For 2018 which went from bearish at the time of writing (three quarters ago) to bullish early 2018. We look at a gold price prediction based on the dominant gold chart pattern as well as the gold futures market structure, and we believe there is a very clear message that is nicely in sync increasing the odds of our gold prediction: gold price will go from bearish in the short term to strongly bullish right after.
From an intermarket perspective it is somehow understandable that gold has been weak in recent weeks primarily because of US Dollar strength. Although this negative correlation between the Dollar and gold is not visible on a day-by-day basis it definitely is there on a longer term time frame for sure when one or both start trending strongly (up or down).
InvestingHaven‘s research team explained in How The US Dollar May Impact Emerging Markets In 2018 that the most influential market in the world right now is U.S. Treasury Yields. Interestingly, 20-Year Yields are at a make-or-break level. After they turned their 4-decade downtrend into an uptrend recently there is a breakout test at play now. If, and that’s a big IF, rates do not go lower from here, we expect weakness in the Dollar which will drive precious metals higher in the 2nd half of 2018. The opposite is true as well.
It is imperative to choose the right view to assess a market or an asset, in our case, gold. The length of the time frame as well as the type of chart are a key success factor.
Gold price: short term bearish followed by strongly bullish
We prefer to look at gold’s long term chart which shows both the uptrend (until September 5, 2011) as well as the subsequent downtrend (until today included). The reason is that we look for specific patterns within a long term trend. Remember: the clearer the pattern the higher the probability of a forecast.
