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Gold price forecast: Gold prices might reach extremes in September

10:59 | 11/08/2020

The near-term trends in precious metals reached extremes – a temporary top is becoming likely. A daily close below $2,000 in gold would confirm a spike-high top and beginning of a 1 to 2-month correction.

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gold price forecast gold prices might reach extremes in september
(Photo: FX Empire)

According to FX Empire, the near-vertical rise in precious metals over the last month has led to extremes in bullish sentiment. Investors are beginning to chase prices, and this frequently occurs near an intermediate top.

US Dollar

The dollar has declined over 10% from the March high. The trend is incredibly oversold and due for a multi-week rebound. Gold and precious metals should correct as the dollar works off its deeply oversold conditions.

gold price forecast gold prices might reach extremes in september
(Photo: FX Empire)

Gold

After breaking out above $1800 in July, gold entered a near-vertical advance taking prices above $2000. On Friday, prices reversed and formed a large bearish engulfing candle enhancing the potential for a top.

Closing back below $2000 would complete a spike-high and support a multi-week correction. Primary support comes in around $1775, with a secondary target near $1670.

gold price forecast gold prices might reach extremes in september
(Photo: FX Empire)

Silver

Silver entered a parabolic rise above $20.00, and the trend is very overbought. If prices stay below $30.00, I think we likely have a cycle top. Initial support comes in around $22.50, below that $19.00. An extended breakout above $30.00 would support a quick run to $35.00.

gold price forecast gold prices might reach extremes in september
(Photo: FX Empire)

GDX

Miners closed below Wednesday’s black exhaustion candle, supporting a cycle top. Initial support arrives at $37.00, followed by $31.00.

Once gold and silver bottom in September, we expect prices to rally sharply into January 2021 as the dollar finishes the decline into its 3-year cycle low.

gold price forecast gold prices might reach extremes in september
(Photo: FX Empire)

Prices Consolidate as Hedge Funds Continue to Add to Long Positions

According to FX Empire, Hedge funds continue to add to long positions in gold futures and options.

Gold prices moved lower and are consolidating near the all-time highs. The dollar moved higher as US yields backed up slightly. US yields were mixed, with the 10-year edging slightly higher. Hedge funds added to both long and short positions in futures and options according to the latest commitment of trader’s report released for the date ending August 4, 2020.

Technical analysis

Gold prices moved lower following a week where prices increased by 2.5%. Support is seen near the 10-day moving average at 2,002. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. The current reading on the fast stochastic is 87, above the overbought trigger level of 80, which could foreshadow a correction Medium-term momentum is negative to neutral as the MACD (moving average convergence divergence) histogram prints in the red with a flattening trajectory which points to consolidation.

gold price forecast gold prices might reach extremes in september
(Photo: FX Empire)

Managed Money Continues to Buy Gold

Hedge funds continue to purchase gold according to the latest commitment of trader’s report released by the CFTC for the date ending August 4, 2020. According to the CFTC, managed money increased their long position in futures and options by 3.7K contracts while increasing short positions in futures and options by 4.7K contracts. Open interest that is long futures and options in the managed money space outnumbers short positions in futures and options by 5-fold, 215K to 41K.

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