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Gold Price Forecast: XAU Holds Support as Monthly Gold Bar Goes Doji

GOLD PRICE ACTION LOOKS TO CLOSE AUGUST AS A DOJI


It’s the final day of August and it’s already been a big year for Gold. And in the four months remaining for a 2020 that’s been unprecedented in a number of ways, there’s a number of drivers that can keep Gold markets moving.

Next month is the final in Q3, and October brings in Q4 with a pensive Presidential Election waiting in the wings for November. This isn’t to mention the daily dose of vaccine reports or stimulus measures, all underpinned by a brute force of uncertainty produced by a still-ongoing pandemic.

By-and-large, this year’s fear has been fairly beneficial for Gold prices. To be sure, the bullish backdrop in Gold began firing on all cylinders last year, carrying a full head of steam into the New Year Open. But the backdrop, even before Covid, appeared accommodating for more gains as evidenced by the fact that myself and others at DailyFX looked at Gold as one of our ‘top trade ideas for 2020.’

Taking a step back to the Monthly chart, and the net of this month’s price action has produced a doji. Dojis are indicative of indecision, and when showing at the top of a really strong move, can potentially open the door for pullback or reversal potential. But, for that to come to life, sellers would need to show some element of follow-through in the final month of Q3 to open the door for an evening star pattern.

Of note, the last time Gold price action printed a doji formation on the monthly chart, this led to a second month of indecision before buyers finally got back into the drivers’ seat to push up to fresh highs. That was in February and March of this year, just as the coronavirus was initially getting priced-in to markets.

GOLD PRICE STRATEGY MOVING FORWARD

The possibility of bearish potential is likely going to need some element of motivation. US Dollar strength could do it, although after last week’s comments from Jerome Powell at Jackson Hole, there’d likely need to be something else that pushes that potential for USD strength forward. As looked at earlier today, the US Dollar is pushing towards a big zone of support and that could possibly open the door for reversal scenarios in the Greenback, which could also bring on similar reversal themes in Gold prices.

But for Gold to reverse there may not need to be an outsized bullish response in the US Dollar, similar to what was seen earlier in August. As noted earlier, Gold prices put in a bearish engulfing candlestick on August 7th, which led into a tumultuous sell-off on Monday, Tuesday and Wednesday of the following week. Correspondingly the US Dollar put in a mild move of strength that merely set a lower-high.

 

Reference by: James Stanley, Strategist for DailyFX.com






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