Growing Demand for Safe Havens to Drive Gold's Rally

Given all of this, the commodity is more than likely to continue heading north in what is starting to look like a major rally in the works.

1. Long-Term Outlook:

The price of gold looks poised to continue developing a new uptrend following the completion of the preceding downtrend. The price bottomed out at 1680.00, which is where a major 1-5 impulse wave pattern, as postulated by the Elliott Wave Theory, was completed. Then, the price action developed an inverted double bottom pattern, which is typically taken to signify mounting bullish pressure.

At present, the price of gold is advancing within the boundaries of an ascending channel. The first significant milestone in the development of the new uptrend was encapsulated by the breakout above the 23.6 per cent Fibonacci retracement level at 1771.55. The price is currently consolidating above this resistance-turned-support and below the 100-day MA (in blue).

Once this temporary range is concluded, the price would be ready to resume climbing. The next logical target is encapsulated by the 38.2 per cent Fibonacci at 1827.33.

The latter is about to be crossed from above by the descending trend line (in purple), which has already caused two major reversals. That is why the price of gold is likely to struggle before it manages to penetrate above 1827.33 decisively.

On the other hand, the 50-day MA (in green) currently serves as a floating support, accompanying the emerging uptrend. If, however, the price does manage to break down below the 50-day MA, this would signify the potential termination of the bullish setup.

2. Short-Term Outlook:

As can be seen on the 4H price chart below, the price action has indeed been consolidating in a narrow range as of late. Before the price of gold could continue climbing higher, it could fall to the bottom of the ascending channel one more time. Such a type of adverse fluctuation would be completely inlined with the erratic nature of consolidation ranges like the one presently observed.

There are plenty of reasons to expect a rebound from the lower end of the ascending channel. While the price action is currently being concentrated above the 100-day MA (in blue) and the 50-day MA (in green), the 150-day MA (in orange) and the 200-day MA (in purple) are rising parallel to the lower edge of the channel.

Moreover, the latter is also being crossed by the resistance-turned-support level at 1755.00, which represents yet another major turning point. Given that the 23.6 per cent Fibonacci is also thrown into the mix, all of these factors seem to suggest that there is considerable buying bias between the current price level and 1755.00.

The likelihood of a potential drop down to the lower boundary of the channel is supported by the fact that the MACD indicator registered a bearish crossover recently. When the evolving divergence is examined in light of the growing selling pressure in the short term, as depicted by the oversold Stochastic RSI indicator, the possibility of such a bearish correction becomes even more apparent.

The temporary range that was mentioned above is depicted on the hourly chart below. The price action continues to bounce between the resistance area (in red) and the support area (in green), which can be used by bulls as an opportunity to determine when to go long.

The recent rebound from the 50-day MA confirms the expectations for another dropdown towards the support area, which is where bulls can look for an opportunity to join the market.

3. Concluding Remarks:

While bulls can even try to go long near the current price, they should keep in mind that adverse fluctuations could drive the price of gold as low as the 1755.00 support level, which would trigger and narrow stop-loss orders. That is why bulls should remain cautious and patient.

Time for a Correction on the Price of Gold

The price of gold is in the early stages of developing a new major uptrend; however, this does not preclude the possibility for the emergence of interim corrections. As it is about to be seen, the current confluence of bearish indications seems to suggest that the time is right for the development of one such dropdown.

Following the massively volatile previous week, the economic calendar for the next several days seems rather uneventful in comparison. The commodity's price advanced considerably last week, given this robust commitment in the market, as global demand continued to lift.

But except for the crucial inflation data in the U.S. this week, the much more subdued market bias is likely to stymie the uptrend. Hence, the underlying fundamentals seem favourable for the emergence of a new bearish correction.

As can be seen on the daily chart above, the price action is currently nearing the descending trend line (in purple), which has already prompted major retracements on two separate occasions. Moreover, the latter currently coincides with the 200-day MA (in orange), which is also a critical floating resistance.

That is why a potential retracement from the 1850.00 level seems highly probable. Moreover, the breakout above the 38.2 per cent Fibonacci retracement level at 1827.33 only happened today, which means that the breakout is still quite tentative. This makes a potential bearish rebound seem even more likely.

On the condition that the price action does indeed break down below the 38.2 per cent Fibonacci retracement level, the next target for the developing bearish correction would be elucidated by the 23.6 per cent Fibonacci at 1771.55. That is where the correction is likely to bottom out, or, at any rate, at one of the several moving averages.

The broader outlook remains more bullish than bearish, which is why bears should not count on bigger dropdowns than that. Once the correction is exhausted, the price of gold is likely to continue advancing further north.

An eventual breakout above the 38.2 per cent Fibonacci and the descending trend line would allow bulls to drive the price of the commodity towards the next psychologically significant target level - the 61.8 per cent Fibonacci at 1917.50.

Gold Ready for an Elliott Retracement Leg

The price of gold remained relatively flat over the last couple of days amidst growing uncertainty in the crypto market. The tribulations resulting from China's decision to ban cryptocurrency transactions exacerbated investors' concerns and caused a temporary uptick in demand for safer securities.

In light of these developments, gold remains in a robust uptrend, but a correction might be due next. Stabilising economic conditions and easing tensions in the Middle East are likely to contribute to a momentary dropdown in the price of the commodity.

The Israel-Palestinian ceasefire from today is de-escalating tensions in the region, which is allowing global uncertainty levels to decrease. This is likely to lead to diminished demand for safe-havens, at least in the short-term, potentially contributing to a minor correction in the price of gold.

Nevertheless, it should be remembered that metals are entering into a new supercycle, which ensures the longer-term market bias remains ostensibly bullish-oriented.

That is why the probability of a minor correction emerging next is very high, while the underlying outlook remains prevailingly bullish. This can also be inferred from the 4H chart above.

The latest uptrend on the price of gold can be represented as a major 1-5 impulse wave pattern (in green), as postulated by the Elliott Wave Theory. Each leg of this pattern can, in turn, be examined as a smaller 1-5 pattern itself.

The most significant development of the second impulse leg (2-3) of the broader pattern is that it managed to break out above the descending trend line (in purple), which was examined in greater detail in the initial analysis.

Having reached a peak at point 3, near the major Resistance Area (in red), the broader pattern now seems ready to establish the second retracement leg (3-4). This leg is likely to take the form of a corrective ABC pattern, similarly to the first retracement leg (1-2).

An ABC correction could fall to the 38.2 per cent Fibonacci retracement level at 1827.33 before the bullish market commitment is reinvigorated. The descending trend line is also a likely contender to act as a dip of this upcoming correction.

At present, the 50-day MA (in green) is nearing the descending trend line, whereas the 100-day MA (in blue) is about to converge with the 38.2 per cent Fibonacci. Both of these moving averages serve as potential turning points.

The bearish crossover on the MACD indicator confirms the expectations for the emergence of a bearish correction in the short term. Bears, thus, can utilise contrarian trading strategies at present.

Bulls, in contrast, can also take advantage of this setup by waiting to buy the dip. They can look for an opportunity to go long near the 38.2 per cent Fibonacci, on the expectations for the subsequent emergence of the final impulse leg (4-5). It is likely to appreciate towards the 61.8 per cent Fibonacci at 1917.50.