Almost 10 years in the making, however earlier this week Gold rallied to a new all-time high of over $1,981 per ounce.
This move has led many to speculate that higher highs could be on the cards in the near future as global uncertainty continues to impact financial markets.
But what are the facts, and where might gold be headed next?
Fundamental overview – How did we get here?
At the beginning of the year, the possibility of gold reaching new highs were clear to see, in my 2020 forecast the key question I posed was “could we see gold heading to $2,000”.
The fundamentals at the time were creating great concern for financial markets. Entering the year, tensions between the U.S. and Iran were at all-time highs, President Donald Trump was in the process of being impeached. Plus the trade war with China was still ongoing.
Being a safe haven instrument, investors would traditionally turn to the metal during times like the above, however the addition of the COVID-19 pandemic was the straw that broke the camel’s back.
Technical Analysis – What next for Gold prices?
As you can see from the article I wrote in January, gold prices had just broken the $1,611 level, with the RSI at the time at around 61, whilst the all-time high stood at 85. As this was on a monthly time-frame it showed that even though the prices reached what was a 7 year high at the time, there was still significant upwards volume still left.
Now, the chart below, which is also a monthly, shows that the RSI has reached its historical high. So now 2 questions remain. Will the RSI break out of this level, a feat which has never been achieved, with data going back to 1998, or are we about to see a re-writing of the record books?
“We may see markets continue to trend up, however looking at it longer term, it may be hard to argue against the logic of what goes up must come down.”
One positive however for longer term bull is the fact that although the 3 moving averages ( 10, 25 and 50 month) have crossed over, history shows us that they typically continue to mature a while longer once they gain upward steam.
In the short term, we may see markets continue to trend up, however looking at it longer term, it may be hard to argue against the logic of what goes up must come down.
However as the U.S. election looms, and still many unanswered questions about the global economy and the next phase of the COVID-19 crisis, nothing can be left off the table.
Senior Market Analyst