- Summary:
- Gold price could be heading to $2000 if you use the 23-year chart. The price has formed a cup and handle pattern and is attempting to test all time high
Gold price relatively unchanged in the Asian session as investors looked ahead to critical data from Europe and the United States.
Gold price eyes US jobless data
Gold price tends to move in the opposite side of the US dollar. This is because gold is not an ordinary metal like copper and platinum since it does not have any material industrial use. Only a small percentage of all gold that is mined is used in the jewellery industry. Instead, most of it is hoarded by central banks and asset managers.
Therefore, the price of gold could be waiting for the important jobless data from the United States that will be released later today. Analysts expect that millions of Americans applied for jobless insurance in the past week. The median estimate for the number is about 4.5 million. This will bring the total claims in the past five weeks to more than 25 million people. As a result, there is a likelihood that the unemployment rate will soar to more than 10% this year.
US new home sales and manufacturing data
We will also receive new home sales data and manufacturing PMI numbers from the US. Analysts expect the new home sales to have dropped by more than 15% in March. This will be the worst drop since the last financial crisis and will happen because many people are not buying homes during the lockdown. The slow new home sales data will come a day after we received disappointing existing home sales numbers.
Another important data that could move gold price will be the manufacturing PMI data from the US. As with all numbers from the country, analysts expect the PMI to drop to a record low of 38. This will be the worst performance of the sector since the past financial crisis.
Meanwhile, investors are still reflecting on a recent bullish call from Bank of America. Analysts at the bank predicted that gold price would probably reach $3,000 in the next 18 months.
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Gold price technical outlook
Looking at the gold price chart from 1998, we see that the first bullish trend ended in September 2011, when the price reached a high of $1,920. The price then declined and found resistance at the 50% Fibonacci retracement level. This retracement was drawn by connecting the all-time high and the lowest level in September 1999.
The price has been on an upward trend since then and has been attempting to retest the all-time high of $1,920. At the current price, gold price has about 10% upside to get to that level. At the same time, the price has formed a cup and handle pattern. Therefore, I expect the price to move retest the $1,920 resistance level in the near term because it has already passed the 23.6% retracement level. Any moves above this price would see it attempt to reach the $2,000 level.
The alternate scenario is where bears come in and push it lower to test the 23.6% retracement and the important psychological level of $1,500.