Some curious anomalies at present and none more so than for gold. With markets plunging with ever-increasing momentum one would expect to see gold rising strongly on safe-haven flows. And perhaps none more so than yesterday with the YM Emini closing 1268 point lower on the day on rising volume and widening spreads. For gold, this should have been a positive one, yet the price action for the precious metal was relatively muted, rising then falling and closing with a deep wick to the upper body and a shooting star candle on high volume. Equally puzzling is the weakness in the US dollar, not least as a second safe haven, but in addition a direction which would normally be positive for commodities. So what are we to make of the last few days, and more importantly the outlook for next week?
The initial weakness first appeared on Monday on high volume with a wick to the upper body, signalling selling and no doubt some profit-taking. Tuesday’s price action then triggered the volatility indicator and within which we continue to trade at the time of writing. Yesterday’s price action signaled weakness which has been the case in the early trading session today with gold moving lower, but still within the spread of Tuesday’s candle.
Much will now depend on how today’s price action closes. If the selling continues and moves below the $1627 per ounce level and the low of Tuesday, gold the metal is likely to continue lower, given the low volume region now below on the volume point of control histogram, with a possible return to the $1600 per ounce area. As we can see, even at this early stage in the trading session, the volume is building strongly and suggesting further selling to come.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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