Gold Price Forecast 2022: A Contrarian View To JPMorgan’s Bearish Stance
According to a 2022 market outlook report published by J.P. Morgan Global Research recently, the gold price will be under pressure given the tightening monetary policy by Fed this year. “An unwinding in ultra-accommodative central bank policy will be most outright bearish for gold and silver over the course of 2022,” the analysts said.
Since the macro environment does not favor for gold this year, I have analyzed Gold using the Wyckoff method to find out the tell-tale signs derived from price and volume only, which reveals a contrarian view to J.P. Morgan’s.
Price Volume Analysis in Gold
As shown in the daily chart below, gold (GC) reached a peak near 2100 in Aug 2020 with a parabolic run up followed by a distribution as boxed up in red. The selling bars with wide price spread are highlighted in yellow, correspond to spike of volume (as highlighted in blue). Every time gold price hit 1950, selling took place with increasing of volume. Supply zone between 1850-1950 is hence identified. Subsequent rally in May and November 2021 confirmed the presence of the supply zone.
The downtrend of gold from August 2020 till March 2021 was stopped by a biggest up wave as highlighted in orange, which can be considered as a change of character because it changes the trading environment from downtrend into a trading range from June 2021 till now, as boxed up in green.
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In the latest trading range (in green), selling bars are also highlighted in yellow, which correspond to spike of volume (as highlighted in blue). It is worth to note the shakeout type action in Aug 2021 hit the support at 1675 followed by a quick recovery, which defined a swing low.
Subsequent tests formed a higher low with decreasing volume. In November 2021, gold had a false breakout followed by a rejection back into the trading range (in green) with increasing volume, yet it still formed a higher low.
With increasing effort (volume) to push the price down, the result was a higher low, suggested supply absorption at the higher level. This is a bullish behavior in gold based on Wyckoff’s Law – Efforts vs Results. Watch this YouTube video to find out more on how to apply efforts vs results in day trading.
2022 Gold Price Prediction and Outlook
Gold is bullish as long as the support level at 1760 hold. Since gold is coiling within the apex formation (as annotate in the black lines), it is likely to make a move out from it by February 2022.
Should a tight consolidation just under the downtrend line (in black) around 1840 happen, a breakout to the upside to test the resistance zone at 1880-1920 can be anticipated.
The first price target of gold is at 2280 based on a conservative Point and Figure (P&F) price target projection, which is likely to be accomplished in this year under a bullish scenario.