Last week was another topsy turvy ride for gold investors who were hoping for a further recovery in the precious metal and build on the previous week which had seen it recover from a low of $1446.20 per ounce to close at $1468.50 per ounce. But this was not to be, and it was Thursday and Friday’ price action which gave a strong signal of the weakness which continues to dominate.
On Thursday, gold fell heavily ending the session with a wide spread down candle on good volume, followed by Friday, which confirmed this weakness as the market attempted to rally, only to close well of the high of the session and resulting in a candle with a deep upper wick and narrow spread body on good volume. Whilst the technical outlook for gold remains bearish, the metal was not helped by the reaction in the US dollar on Friday, with the dollar index rising 0.34 on the day to close at 98.27 with a wide spread up candle and close to the key 98.50 technical level which if breached is likely to add further bearish pressure to the commodity complex including gold.
From a technical perspective, there are also two further issues for gold. First, immediately below the current price action we have volume falling away on the VPOC histogram and which therefore offers little in the way of volume based support. Second price based support is also very limited, with the two regions denoted with the blue and red dashed lines of the accumulation and distribution indicator in the $1445 per ounce area, also unlikely to offer any help to gold. The thickness of the lines denotes the strength of these regions, and as can be seen, these have only been tested once and twice respectively, and are therefore only minor levels of potential support. The trend monitor indicator also remains very bearish as the rally of the last couple of weeks runs out of steam.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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