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A Gold Price Forecast For 2018

What will the gold price do in 2018? That’s the question top of mind of investors after both bulls and bears got confused this year: gold moved from a breakout to a breakdown situation. Gold made investors bullish this year only to result in strong bearish price action subsequently. Given the recent neutral trend in gold what is InvestingHaven’s gold price forecast for 2018?

Note that our gold price forecast for 2018 is one of the many articles that appear in our series of market forecasts for 2018 written by InvestingHaven’s inhouse research team.

We see 3 potential scenarios related to the price of gold playing out in 2018, which we discuss in this article. We highlight which scenario we believe is likely to play out, and which price levels to watch to validate either of the scenarios.

Before deep-diving into our scenarios we feel we need to warn readers not to get overly excited when reading all those bullish 2018 gold price forecasts by perma gold bulls on gold blogs, like here and here. Interestingly, none of them feature any gold chart. How can anyone simply rely on “reasons to be bullish on gold” without checking a couple of charts on different time frames is beyond us.

A gold price forecast for 2018: bearish scenario

According to the historical gold chart we see that gold’s price continues its downtrend in 2018 within its secular channel. It really reminds us of the situation at the end of the 90ies. That is when gold concluded its two-decade long downtrend. However, such a trend change from one secular trend into another one is a process, and it can last a couple of years.

We feel that the same is happening right now. The trend change from gold’s 10 year uptrend into a downtrend took 1.5 year (end of 2011 till early 201). Subsequently, we would not be surprised to see a trend change from bearish to bullish, and only that change is starting in 2018. In such a scenario gold will still remain in a downtrend in 2018.

According to gold’s long term chart gold remains in a downtrend as long as it trades below $1350. The most important price points to watch are $1100 (the center of the downtrend channel) and $925 (the bottom of the trend channel).

Our best gold price forecast for 2018 is that the $1000 level will be tested, and that gold trades moving either near resistance or near suport within its long term channel.

Interestingly, though not necessarily relevant: this UBS analyst came to the same conclusion as ourselves, though he is coming from elsewhere. He was bullish for 2 years, but does not see any “reason” now to continue to be bullish on gold in 2018.

We rate this bearish scenario a 60% probability.

An alternative gold price forecast for 2018: neutral scenario

Though we believe that the above outlined scenario has a high probability to play out in 2018 we still feel that a neutral scenario deserves to be taken seriously.

If the price of gold moves above $1280, and remains there for a longer period of time without breaking out of $1375, it would indicate that a new trend has started: the downtrend would be replaced by a sideways (neutral) trend.

We observe this neutral scenario on the shorter timeframe. While the above chart is a historical chart on 40 years, the one below is a weekly chart on 10 years. The possibility of a sideways pattern is suggested by the flat channel annotated with red trendlines. The price levels to watch are $1375 (resistance) and $1050 (support).

If gold would correct to the $1050 and $1100 level, and sets a higher low compared to the December 2015 bottom, it would be hugely bullish long term, and would fire a signal that our gold price 2019 (!) forecast would become very bullish. In that scenario 2018 would be characterized as a transition year.

We rate this neutral scenario a 30% probability.

A not very likely gold price forecast for 2018: bullish scenario

Lastly, the possibility of gold to break out into a new secular uptrend in 2018 seems to be unlikely, at least according to us. The only thing we say about this: once the price of gold goes above $1375, and trades there for at least 3 consecutive weeks, we could be looking at a breakout scenario. In that case $1550 would be a price target.

We rate this a 10% probability.

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