Gold has rallied impressively on the Brexit news. Gold is getting a safe haven bid as stock markets are crashing.
How high can gold go?
First, let’s start with our viewpoint which we made last week. Gold should set at least 5 consecutive closes above $1,291, as explained in Gold Bull Or Bear Market: Why June 2016 Is The Most Important Month Of The Decade. Today will be the first day, so it is important to see how gold reacts next week and the week after. As said, June 2016 would be an extremely important month for gold.
The hourly chart is for fun purpose only. It shows an impressive rally from $1,240 to $1,370 in a matter of two or three hours. Obviously, this is pure electronic trading, in the futures market, in the overnight session. In no way can regular investors participate to this frenzy.
The more important charts are the daily and weekly.
The daily chart shows a first sign of a break above 52-week highs, out of the consolidation range since February of this year. Is the start of a new bull market? We will find the answer in the weekly chart.
The weekly is the most valuable chart to answer our key question: how far can gold rally?
We believe there are two scenarios. Either this was it, and gold did what it could, i.e. rally until it reached huge resistance. As the weekly chart shows (below), today’s highs coincide with the lows of 2013. That has a significant meaning. If gold breaches $1,370, that would be extremely impressive, and certainly the start of something bigger.
However, the area between $1,291 and $1,370 is a critical resistance area. It will not be simple, even with this Brexit scenario, for gold to stay within this area, set aside break out of this.
Investors should closely monitor how gold behaves in the $1,291 to $1,370 area to get an idea of the long term potential of today’s price action, and the impact of this Brexit.