Gold needs to top $1,515 for the next leg of rally

It has been a mixed year for gold as after reaching $1,580 in early September, prices corrected to $1,450 on optimism of US-China trade deal. Equity markets are trading at record highs, which again means that funds are flowing into stocks, as investors are in risk on mode. The US dollar is getting stronger, another headwind for gold.

With fears of a global recession abating and treasury yields reversing course, gold investors seem to have lost momentum and gold has crashed from $1,580 to sub $1,500 levels. Now gold is near $1,450-$1,440, which is its support zone.

In spite of the recent correction, gold performance for 2019 is still positive and bullish picture has not deteriorated from medium to long term point of view.

Gold made the flag pattern from $1,208 to $1,369 after which it consolidated from $1,379 to $1,280 and then once it broke the flag pattern, it never looked back till $1,560. Again gold has made the flag pattern and same setup is being formed. It is still an impulse structure. According to Elliot wave, gold has completed its 5-wave patterns and is now in the corrective phase as seen from the second chart.

According to Lead-Lag reports, gold recently saw one of the worst weeks since 2017 after US markets made record high. The consensus is that gold cannot rise when stock markets are rising and that is true but we are not seeing sell off in gold either.

So technically, gold needs to break (bullish flag pattern) $1,515 before going long. However, for the flag pattern to fail, gold will have to break levels of $1,415. If there is Santa rally in equity market and gold prices break $1,415 then expect gold prices to remain subdued otherwise as long as $1,415 holds, gold bulls have some hope.

(Investors are advised to consult financial advisers before taking an investment calls based on these observations)