Gold prices have had a disappointing performance so far, considering the strong uptrend in most commodities. Gold has significantly underperformed its peers. As we write this article, there is a valid possibility that commodities are reaching a top. There is also an extremely strong possibility that the US dollar’s uptrend is exhausted. More interestingly, there is a strong possibility that our bullish gold forecast 2022 is ‘on track’ to materialize.
How this current market anomaly (commodities and the US dollar rising and topping concurrently) will affect the price of gold is unknown. However, we see some clear price levels and patterns investors need to know in order to catch the uptrend in gold, or even exit should this setup get invalidated.
Before we get into price levels and charts, here is a short excerpt of our annual gold forecast in 2022:
"We predict gold’s price could rise to $2,500 area in 2022. Our 2022 forecast is strongly bullish, but we need the US dollar to first run its course before gold can accelerate. We believe gold will accelerate mid-2022."
Gold's Price Setting Up in an Extremely Bullish Chart Pattern
The chart below shows a bullish symmetrical triangle. After a consolidation that lasted for a few years, we saw a strong leg up in the price of gold that started early 2019 and peaked late 2020. This triangle is a continuation pattern, and if the price breaks out to the upside from here, a conservative target could be around $2700.
From an intermarket perspective, we have to consider a weakening US dollar, which should help push gold’s price up. We also have commodities as an asset class that is facing overhead resistance. So, the price could still breakout either way. However, we maintain a bullish bias given the chart setup and potential US dollar weakness.
Gold Price Levels To Watch For a Breakout Or a Breakdown
Since the support at $1800 held, $1850 to $1900 would be the first resistance area. Once that’s cleared, crossing above the $2000 level would signal the start of a breakout.
Gold's real breakout will happen once the price breaks and holds above the $2100 level. This setup would be invalidated with a fall below the $1750 level.
Why is The $1750 to $1800 Area Crucial for Gold?
The reason why this support level is crucial can be seen clearly in the chart below. That level was the top from 2012, and if it holds, we would have a solid base that could send gold prices higher in the second half of 2022. In fact, every time the price revisits that area and it holds, we have a successful back test of that important breakout level.
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