Whenever I begin to write any analaysis of the gold chart I always do so with a slightly heavy heart, as I am very conscious of the strong emotions the precious metal rightly generates. For many, gold is the ultimate investment and financial protection, the ultimate long term buy and hold for the future, and as such is a market, much like stocks, which has a bullish bias in the sense of perspective when considered as an asset. So when writing about gold, particularly over the longer term time horizon I am always conscious that many will be reading the analysis from an investment perspective, and not from a purely speculative one as a trader. For me, and other gold traders, all we care about is being on the right side – whether the gold market moves higher or lower longer term is of little concern. What matters is being on the right side of the market intra day, either long or short. So perhaps on this occasion, let’s begin with the longer term time frames for any signs of a reversal in the longer term bearish trend and for this, the slowest time frame of all on the monthly is perhaps the most revealing.
And here the chart really speaks for itself with the accumulation and distribution indicator clearly defining those levels, which are now pivotal. The ceiling of resistance in the $1350 per ounce region continues to hold firm, but perhaps of more concern, the rally at the start of 2015 even failed to achieve this level, falling well short before reversing lower in February on rising selling volumes. The floor of support is equally well defined, as shown by the accumulation region in blue, and indeed there are two levels now in place, one immediately below the other, with the first at $1155 per ounce (the deeper of the two) and the second at $1145 per ounce.
Last month’s price action confirmed the weak nature of this market once again with the rally higher failing to hold, and May looks set to repeat this as a return to strength for the US dollar, driven by the FED has helped to push many commodities lower, along with gold. So this platform of support is now seminal to longer term moves, and though I hate to say it, any move through this level will then open the way to a deeper and more sustained move for gold, with the next level below in the $1050 per ounce region. The problem from a volume price perspective, is that there is nothing to suggest any form of buying climax as the precursor to a reversal in trend longer term. Volumes have picked up a little, but hardly suggestive of a major accumulation phase just yet. In addition, the trend monitor indicator below the price action continues to remain red and with no signs of any transition.
Moving to the weekly chart, and a more granular look at the price action, the resistance level in place at $1225 per ounce brought a halt to the rally of three weeks ago, with last week reversing off this level and this week’s price action driving gold lower once again. The key level in this time frame is as shown by the blue dotted line of accumulation in the $1180 per ounce region, and if this holds, then we could see a bounce back to test the $1225 per ounce level once again as the current extended phase of congestion continues. However, should this be breached then the next level at $1138 per ounce awaits.
Finally to the daily chart, and for intra day traders the key levels here are well defined. The ceiling of resistance is in place at $1210 per ounce whilst the floor of support is being tested in early trading at $1190 per ounce. Yesterday’s price action hinted at a bounce today, given the high volume associated with the narrow spread candle as buyers once again moved in following Tuesday’s wide spread down candle on heavy selling volumes. Intra day, we may see a move higher, but on this time frame expect to see further downside momentum in due course and back to test the platform below in the $1175 per ounce region.
From a fundamental perspective there are any number of factors which should be supportive of gold, not least the shambles surrounding the Greek debt negotiations. However, even this hugely important issue has not impacted the gold price in any meaningful way. For gold investors, inflation holds the key – it may well be a long way off, but if the FED hold their nerve, and economic data confirms the recovery, then in due course this will become one of the primary drivers for the precious metal, and longer term gold investors will finally have some positive news for their most prized asset.
By Anna Coulling
Charts are from NinjaTrader and the trading indicators from Quantum Trading.
Leave a Reply