Fibonacci Resistance On The Horizon For Gold

Posted Saturday, December 15, 2018 by
Shain Vernier • 2 min read

2018 has been a year to forget for the GOLD bugs. Values of bullion have fallen consistently amid strong U.S. economic performance and growth in global equities. No matter what challenges have arisen ― trade wars, stock market volatility, or political upheaval ― gold has stayed depressed. However, this may be beginning to change. February gold futures are performing well as 2018 draws to a close. As a result of the recent bull run, a key level of Fibonacci resistance is on the immediate horizon.

At the moment, there are many reasons that safe-havens should be gaining more attention from the financial world. Political uncertainty surrounding Brexit and the newly split U.S. Congress are two factors capable of sending equities valuations south in a hurry. If one believes FED projections for a slowing U.S. economy in 2019, then the case is furthered for the acquisition of bullion.

So, why is gold struggling to post the explosive gains we saw last year at this time? Aren’t there enough questions to drive investors to safe-havens in anticipation of forthcoming economic turbulence? For now, the answer is no. While economists expect growth to slow in 2019, it is to remain positive. As a result, the U.S. FED will be in a position to continue tightening monetary policy and boosting the value of the USD. This concept has made holding Greenbacks, as well as U.S. government-backed debt, more attractive. Until we see the FED back off on rate hikes (Q1 2019) gold is likely to be held in check.

Fibonacci Resistance In Sight For February Gold Futures

The weekly chart for February gold futures pretty much sums it up ― 2018 has been brutal for those long bullion.

February Gold Futures (GC), Daily Chart
February Gold Futures (GC), Daily Chart

The next two weeks are going to be pivotal for the gold market. During this period I will be watching one key level very closely:

  • Macro-Resistance: 38% Fibonacci Retracement of 2018’s Range, 1259.2

Overview: The 38% retracement of 2018’s range is a key level, essentially the point at which the prevailing long-term downtrend will be challenged. Until the calendar flips to 2019, the 1259.0-1265.0 area will be one to watch for February gold futures.

If February gold futures close the year beneath this level, one has to maintain a bearish bias going into 2019. If we see a bold end-of-year rally and close above 1259.2, then 2019 will be set up for strength in bullion. While there are many more factors that play into the price action of gold, this basic technical appraisal gives us a good idea of where the market stands and where it may be headed in the coming year.

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