Gold price prediction amid becoming the only asset class holding its value so far this year

By: Mircea Vasiu
Mircea Vasiu
When not working, Mircea likes to play football and read. He's a sports fan, always on the move, and… read more.
on Jun 21, 2022
  • Gold held its value YTD
  • Strong demand from the investing community
  • Technical analysis paints a bullish picture

One of the most controversial assets this year is gold. Criticized by many that it failed to act as a hedge against inflation, it currently is the only asset class that has held its value so far in the trading year.

Stocks, cryptocurrencies, bonds, and even real estate have all suffered double-digit drops.

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

But gold held ground at a time when the US dollar is rising against everything. So is this strength in the price of gold here to stay?

Demand from the investing community remains high

The demand for gold ETF holdings remains high, rising since 2016, with North America and Europe being the largest holders. As such, gold ETFs (Exchange Trading Funds) as a percentage of US equities remain in a rising trend, with significant inflows seen during the first quarter of 2022.

Gold forms a possible ascending triangle pattern

Technical traders have noted the recent consolidation in the price of gold. At this point, both bulls and bears may have a case.

Bears may argue that the double failure above $2,000 is a double top pattern – a reversal pattern. On the other hand, bulls may argue that the price is merely building energy for a new leg higher, and the horizontal area that offers resistance is the base of an ascending triangle.

Out of the two scenarios, the bullish one looks more appealing, at least if we judge by the fact that the price of gold keeps the series of higher lows. This is typical in an ascending triangle pattern – a continuation pattern pointing in the same direction as the previous trend.

So what would bears want to see?

A bearish scenario remains valid as long as the price doesn’t break above the horizontal resistance area seen at $2,100. But for bears to really be in control, the market needs to close below $1,700, a move that would invalidate the ascending triangle scenario.

How about bulls?

Bulls look comfortable here. In a time when the US dollar is gaining ground against every other asset, gold’s steadiness is nothing short of impressive. If the series of higher lows holds, one should not be surprised to see another attempt at the horizontal resistance area.

A daily close above $2,100 should trigger another leg higher, as bulls will try to push for the ascending triangle’s measured move. This is the minimum distance that the market should travel and equals the length of the triangle’s longest segment.

In this case, we talk about a $400 move on top of the horizontal resistance area. Hence, a daily close above resistance opens the gates to further strength towards the $2,500 region.  

Invest in crypto, stocks, ETFs & more in minutes with our preferred broker,
75.26% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.