Gold fell 1.21% on Friday following a much stronger than expected November US non-farm payrolls report, ending the week at $1465 which is near the middle of its recent $1445-$1490 trading range. Sentiment has been generally pessimistic on gold for weeks as traders have used recent signs of renewed economic strength as a good excuse to reduce gold positions.
Meanwhile, Goldman Sachs analysts still maintain a US$1600 price target for the yellow metal over 3/6/12 month time horizons. Goldman offered the following in an analyst note:
“Gold cannot fully replace government bonds in a portfolio, but the case to reallocate a portion of normal bond exposure to gold is as strong as ever....We still see upside in gold as late cycle concerns and heightened political uncertainty will likely support investment demand”
The correction since the September peak at $1565 has served to cool off overbought technicals and overbullish sentiment, and I think gold is set up nicely to rally into Q1 2020:
Gold (Daily - 5 Year)
The long term chart structure for gold is extremely healthy and the pullback since September looks like a classic bull flag pattern when viewed from a long term perspective. Seasonal tailwinds will also kick in next week and should be supportive of gold through late-February.
From a support/resistance standpoint, the $1440-$1450 area represents important support with the next major resistance levels up at $1490 and then $1525.
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