The indicators pointing to medium-term tops are usually already ‘too high’, indicating an extremely overbought situation. This tells us that a big drop is coming. However, because they are too high, they do not necessarily tell us at what price level the gold price is likely to change.
The MACD visible on the chart above (the lower part of it) indicates that the situation since 2015 has been more excessive than ever before, but this does not mean that it cannot become a little more excessive before the top is formed.
Consequently, we must rely on other indications, and there is one particularly important indication that provides insight into gold’s short-term objective.
It’s the Fibonacci extension tool, which works by multiplying a previous notable rally by the factor of 1.618 (the Phi number). In our case, this is the gold rally of 2015 – 2020, and the The upside target based on that is around $2,730 (for gold futures).
The recent high for gold futures was $2,694.75, meaning gold is just 1.3% away from its upside target – almost right at that level.