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FXStreet notes that it turns out that the gold uptrend can last quite a long time. Nonetheless, when a correction arrives, the yellow metal could see a drop over 17%, according to Daniel Ghali, Commodity Strategist at TD Securities. Currently, gold is hovering near the lower end of its daily trading range, around the $1985 region.

“It feels good to be a gold bug. After all, it's been hard to lose money being long. In fact, the bulls are rushing to buy the yellow metal with nearly +100% of momentum signals tracked by our ChartVision indicator pointing long, leading to +93% of signals long on a 60d moving average basis. The underlying macro tailwinds are only analogous to the financial repression in the post-WWII era, which provides an incredibly compelling narrative for higher gold prices.”

“But, how long can a good thing last? It turns out, it can last for quite some time. Despite a small sample size, instances of consecutive extreme readings in momentum signals have historically averaged at 45 days, but with a wide distribution. In other words, timing a momentum overshoot is incredibly difficult.” 

“What is more clear, is what comes next, when momentum stops paying. As upside momentum subsides following extreme instances, forward returns tend to be skewed negatively, with sharp drawdowns and limited upside. A consolidation period could last for months, with subsequent drawdowns over 17%. Don't fight the trend, unless it shows a sign of weakness.” 

FXStreet reports that economists at Credit Suisse continue to look for a potentially lengthy consolidation phase in gold to emerge after the move to the core base case resistance at $2075/80 but with this phase still seen as a pause within the core longer-term bull trend. 

“Gold is seeing its expected consolidation following the move to our base case objective of $2075/80. Although we continue to see the core long-term trend higher, reinforced by falling US Real Yields and a falling USD, we suspect there is scope for a more protracted consolidation phase to unfold first.”

“At present, our bias is for a cluster of supports at $1867/37 to ideally hold further weakness, which includes the 23.6% retracement of the rally from the 2018 low. Should weakness extend, we would see scope for a deeper setback to $1765, potentially $1726. Post this phase we look for an eventual move above $2075 with resistance seen next at $2175, then $2300. Whilst we would look for a fresh consolidation at this latter level, a direct break can see potential trend resistance at $2417, with scope seen for $2700/20 over the longer-term.”

“It is worth noting that monthly RSI has reached its extreme levels seen in 2006 and 2008 adding weight to the view for a lengthier pause in the bull trend. Indeed, in the 2001/2011 bull market the two major consolidation phases (2006/2007 and 2008/2009) lasted 16 and 18-months respectively. A similar length of consolidation at this juncture though is not our base case for now.”