Watch These Gold Price Levels as Precious Metal Trades Near Record High

Key Takeaways

• Gold prices will likely remain in focus on Monday after hitting record highs last week, as several catalysts continue driving demand for the metal as a hedge against currency deflation and geopolitical uncertainty.
• The precious metal has moved sharply higher after breaking out from a rectangle in July, a chart formation that indicates a continuation of the commodity’s strong uptrend.
• Investors should monitor price targets on gold's chart projected using the measuring principle and bars pattern at $2,862 and $3,195, respectively.
• During retracements, investors should watch the $2,414 level that may attract buying interest near the rectangle formation's top trendline.

Gold (GOLD) prices will likely remain in focus on Monday after setting record highs last week as several catalysts continue driving the demand for the metal as a hedge against currency deflation and geopolitical uncertainty.

The Federal Reserve’s jumbo half-point rate cut earlier this month contributed to recent bullish momentum, and gold received an additional boost last week from China announcing significant stimulus measures and rate reductions in a bid to revive its sluggish economy. Meanwhile, escalating concerns of a broader conflict developing in the Middle East have also underpinned support for the metal.

Below, we take a closer look at the technicals on gold’s weekly chart and point out important price levels to watch out for amid the commodity’s record bull run.

Rectangle Breakout Rally Continues

Gold has continued its impressive rally after breaking out from a rectangle in July, a chart formation that indicates a continuation of the commodity’s strong uptrend.

Although a relative strength index (RSI) reading nearing 80 confirms bullish price momentum, it also increases the possibility of short-term profit taking as bullion bulls lock in some profits. 

Let’s forecast several potential price targets using the measuring principle and a bars pattern, while also pointing out a key retracement level to monitor.

Measuring Principle Price Target 

Investors can forecast how high gold’s current move higher may go using the measuring principle, also referred to as the measured move technique.

To do this, we measure the distance of the uptrend that preceded the rectangle and add that amount to the formation's top trendline. For example, we add $448 to $2,414, which projects an upside price target of $2,862.

Bars Pattern Price Target

A bars pattern works on the premise of using prior price moves to predict an asset's future direction.

In this case, we extract the commodity’s trending period from May 2019 to July 2020 and reposition it from the February 2024 low, which forecasts a longer-term price target of around $3,195.

We selected this prior move as it followed a period of multiyear consolidation, similar to gold’s current breakout from a multi-year trading range.

Key Retracement Level to Watch

During retracements, investors should keep their eyes peeled on the $2,414 level, an area on the chart likely to attract buying interest near the rectangle formation's top trendline.

Depending on the timing of future pullbacks, this location may also closely align with the upward sloping 50-week moving average.

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As of the date this article was written, the author does not own any of the above securities.

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