Gold Outlook: Triangle Patterns Face Resistance, Positioning Softens

Last week I highlighted the potential for a symmetrical triangle on gold to break higher. Since then, this view has gained traction across social media — which, if anything, makes me sceptical of an imminent breakout. When too many traders see the same pattern, it often becomes prone to failure.

More importantly, bearish exposure to gold futures has eased relative to a few weeks ago, and the US dollar has yet to meaningfully roll over. For these reasons, I suspect gold may disappoint bulls in the near term, delivering at least one more cycle lower before any genuine bullish breakout can take shape.

View related analysis:

• Gold, Silver, Crude Oil Outlook: Technical Analysis, Market Positioning
• WTI Crude Oil Outlook: Technicals Could Realign With Bearish Positioning
• EUR/USD and GBP/USD Outlook: Bullish Patterns Form as Dollar Wavers
• Gold Futures Outlook: Technical Triangle Meets COT Pressure

 

Gold Futures Positioning Signals Near-Term Weakness

Gold Futures Positioning (GC): Weekly COT Report Analysis

Net-long exposure to gold futures has been trending higher since mid-May, with gross longs increasing among both managed funds and large speculators. The fact this coincided with the development of a potential ascending triangle suggests gold prices may be primed for an eventual bullish breakout.

However, gross-long exposure has pulled back over the past two weeks for both groups, nudging net-long exposure slightly lower. Gross-shorts also rose among both sets of trades these past two weeks. Given this retreat is occurring just as gold approaches key resistance, my view is that prices may need to retrace at least once more before any meaningful bullish breakout materialises.

Chart analysis by Matt Simpson, Source: COMEX Futures LSEG

 

Gold Futures Technical Analysis: Symmetrical vs Ascending Triangles

Adjusted vs Unadjusted Futures Charts

We’re comparing two gold futures charts: the adjusted daily futures chart (which accounts for contract rollover) on the left, and the unadjusted chart on the right. There’s debate over which is more reliable, but as a rule of thumb, adjusted charts suit longer-term analysis, while unadjusted charts are better for intraday trading and identifying gaps. Used together, they can provide a fuller picture of potential support and resistance dynamics.

While similar in many respects, the charts differ in key ways.

• The adjusted gold chart (left) peaked in April, whereas the unadjusted version (right) printed a fresh record high in early August.
• The adjusted chart also shows a symmetrical triangle, while the unadjusted displays an ascending triangle — a divergence that traders can use to their advantage.

 

Chart analysis by Matt Simpson, Source: TradingView, COMEX Futures, Gold

 

Why Resistance May Cap Near-Term Breakouts

Both charts highlight the strong rally of the past week and a half, though the unadjusted chart still sits about $70 below its record high. A similar $70 move higher on the adjusted chart would retest the August peak. Yet with the US dollar still firm, net-long positioning in gold less bullish than a few weeks ago, and both charts stalling beneath resistance after a sharp run-up, I suspect any breakout attempt could fail near term and give way to a retracement.

Moreover, if PCE inflation data holds steady or surprises higher, that could lend the US dollar further support and weigh on gold prices.

 

 

View the full economic calendar

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

 

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