It’s tough going for gold bugs at the moment as we start another trading week with the precious metal desperately hanging on to the $1700 per ounce level having opened gapped down at the start of trading but it is perhaps Thursday and Friday’s price action which provides some clues to the ‘longer-term’ outlook for the metal.
Thursday saw some solid gains closing with a wide spread up candle on good volume. Friday then saw a narrow spread down candle on equivalent volume suggesting profit-taking and end of week squaring of positions was being absorbed by the buyers. The price action this morning would suggest the same with volume building yet the price is not falling but trading in a narrow range as we continue to congest around the $1700 per ounce region.
As I have outlined before, the journey higher for gold should be relatively straightforward as there is little in the way of resistance ahead, and with the volume falling away on the volume point of control histogram as we move through $1740 per ounce and on towards $1800 per ounce. Longer-term, with inflation almost certain to be driven into global economies through rising prices in all sectors, this should provide some much-needed momentum for gold and the development of a longer-term trend based on inflation driven flows.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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