Whilst the longer-term outlook for gold investors remains bullish, the short to medium term is taking on a bearish tone, and the weekly chart is perhaps the timeframe to focus on in terms of where the current price is likely to move to over the coming weeks.
If we scroll back to the rally of July, the initial weakness here was self-evident with the candle and associated volume of the first week in August with the deep wick to the upper body on good volume. This was followed by the sharp move lower in a volatile week, with the subsequent week’s trading giving a further sign of a fragile market with an attempt to rally but closing back near the open on high volume. Four weeks of congestion then followed, but note the last two of these, with gold attempting to rally but only on above-average volume. This weak effort to rise was duly followed with a wide spread down candle on high volume and confirming the selling pressure still in evidence, before last week’s effort to rise once more on above average volume.
So from a technical perspective where are we heading next and perhaps the key level here is at $1850 per ounce. The reason for this is because we have a low volume node in this area, which should this be breached, we could return to the strong platform of support which develops in the $1800 per ounce area. This is where we have both high volume on the VPOC histogram and also price based support coming into play and both combined are likely to provide a solid platform for a longer term recovery. In the short term, expect to see gold oscillate in this area with a possible low at the $1800 per ounce area, and provided the longer-term move higher is supported with good volume we should see a return to $2000 per ounce and higher as the precious metal battles through the volume-based resistance now developed in this area.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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