It’s been a roller coaster ride for gold over the last couple of months with the precious metal first rallying almost $200 per ounce, and then promptly reversing from the $1390 per ounce level, and giving back just over half the gain, to trade at the time of writing at $1293.20 per ounce. So the question now is, where next for gold and not an easy one to answer. However yesterday’s price action has given us a strong signal for the short term, and one only has to consider the trading volumes associated with the price action to understand why.
The initial weakness earlier in the month was signalled with rising prices and falling volumes, a sign of weakness in the up move, which was duly confirmed with the move lower over the last two weeks. This has been accompanied by rising volumes under the down candles suggesting further downwards momentum, and no sign of stopping volume – until yesterday. As we can see from the daily chart, yesterday’s volume was extreme, and in addition the price spread of the down candle was narrow, suggesting strong buying at the $1290 per ounce level, and sending a clear signal of the start of a possibly buying climax in this region.
As always, markets rarely reverse on a sixpence or a dime, so we can expect to see some price consolidation at this level, as further buying is absorbed by the big operators, possibly down to test the platform of support now in place at the $1280 per ounce level. However, once it is, then expect to see the price of gold recover once more and regain some of the losses of the last few weeks.
By Anna Coulling
Anna
I think gold is going to the moon it just takes one of these stupid plonkers to raise interest rates, they don’t have to default.
Kind regards
Terry Shead
Hi Anna,
Where is your volume feed coming from? I’m using the free Kinetick EOD feed with NinjaTrader and I see a completely different volume picture for that contract. No stopping volume at all. I noticed your indicator is called “QuantumVolume”? I don’t have that available in my version either 🙁
Hi Mark – I used the live Kinetick data feed – I’m not sure if the EOD id different to the live feed, and I do have some different settings for merging historic data. so perhaps this is the difference you are seeing? Anna
Hello Anna,
I am looking here at the JUN14 and I cannot confirm the volume you see. The 27th was actually slightly lower than the recent days. 28th was better but no followup so the move continues. When looking at your screenshot it states QuantumVolume. Maybe that has something to do with it?
@Terry: I think gold will still fall as there is no credit expansion and thus no inflation. The economy has to pick up first. I actually hope we see gold break a 1000$ because I want to buy more miners 😉
Best
Lorenz
Hi Lorenz – many thanks and it may be to do with my settings for the data feed. I used NinjaTrader with the Kinetick feed for these screenshots – Anna ( good luck with gold, I’m bullish at the moment:)
You know yourself Anna the banks and hedge fund managers play silly buggers with gold
and has regards to inflation who can you believe.
Terry
hi anna,
i do my own analysis for trading but i use most of demo a/c & unable to find any clear volume thing. Spoken to many forex broker but they said they volume appearing on their platform is not real. I use gci mt4 demo , acm gold mt4 demo & onanada mt4 demo. IS it possible for me to add parallel volume bars as shown in your charts ??
kaps
Hi kaps – many thanks for your question. As you probably know there is no central exchange in forex, and therefore no reported volumes, so in this sense the brokers are correct. However, what we do have is tick activity which is then a proxy for volume, and if you think about this logically, ticks display activity in the market which is the equivalent of volume. After all volume is activity and activity is volume which is then displayed in ticks. It has been shown over the years in various studies that tick activity is 90% accurate as a proxy for volume. With regard to the volume at price volume bars, I believe there is a free one on the internet called Market Profile – but not one I have used I’m afraid. Once again many thanks for getting in touch and may I wish you every success with your own trading – kind regards – Anna