Author Archive: Matthew Weller
Based on the secondary indicators, a case can be made for at least a short-term bounce in the coming week. While the MACD is predictably trending lower below both its signal line and the “0” level, showing strongly bearish momentum, the RSI indicator has finally reached oversold territory (below 30). The last time the RSI indicator was this low, gold formed a medium-term bottom just below the 1100 level and rallied for the next three months. Bulls will be hoping that history repeats itself next week.
Despite a modicum of weakness today, gold’s technical outlook remains optimistic in the near-term. After peaking near 1190 last week, gold has nudged its way back down to 1165 as of writing. The shallow, controlled pullback after the big rally of the previous days has created a clear bullish flag pattern. It’s worth noting that, despite its name, this pattern is only seen as a bullish sign if we see a breakout above the top of the flag (currently near 1180).
One of the obvious beneficiaries of the accompanying dollar weakness has been gold, which is both denominated in US dollar and seen as a store of value in competition with the greenback. Today’s big rally has created at least four significant bullish technical signals
Gold’s most recent advance ended last week when price failed to break through the sturdy resistance level around $1170. As a reminder, $1170 is where several technical indicators converged, including a bearish trend line, the 100-day moving average and the 38.2% Fibonacci retracement level of this year’s range. The fact that the rally has stalled at the relatively shallow 38.2% Fibonacci retracement level bodes ill for gold bugs as it suggests the bears are still clearly in the driving seat, which means that the path of least resistance is to the downside.
If gold bulls are able to break through the barrier at 1140, then a more substantial rally toward 1160 or 1180 is possible in the near-term. That said, the longer-term series of lower lows and lower highs would remain intact all the way up to 1200, so bulls should be cautious about getting too excited as long as the metal trades with an “11” handle.
While the price of gold is significantly oversold from a technical perspective, and a rebound to correct the recent over-extension to the downside should be due, the possibility of a relief rally will be largely dependent upon shifting speculation with regard to upcoming Fed statements and decisions.
Gold is testing a critical support level around 1085. This zone represents the convergence of two Fibonacci extensions (the 127.2% extension of the November-January rally and the 161.8% extension of the March-May upswing), as well as the intraday lows on Monday and Wednesday. As we go to press, gold is peeking below that support zone, but it may be worth waiting for the weekly close before assuming that it’s been conclusively broken, especially given the deeply oversold daily RSI indicator.
From a technical perspective, gold is working on a potential Bearish Engulfing Candle* on the daily chart, signaling a big shift to selling pressure. Unless we see a rally during today’s US session, this candlestick pattern will suggest a possible continuation down toward last week’s low in the mid-1150s.
Gold has held steady within 25 points of the $1200 level for over three months now, and while it did gap slightly higher yesterday after the collapse of the Greek debt negotiations, those gains were short-lived. As of writing, the yellow metal is on track for its lowest close since March, dramatically lagging its safe-haven rivals. We often note that one of the strongest signals in trading is when an instrument fails to act “as expected” to a major fundamental development, and this week’s lackluster reaction suggests that gold may be losing its luster and on the verge of a big breakdown.
Gold remains broadly rangebound around the 1200 level. Last week, we highlighted the two fundamental drivers of gold and evaluated the odds of a breakout, and while the bearish impact of the strong dollar pushed the yellow metal sharply lower over the last few days, the two-month consolidation zone from 1180 up to 1225 continues to hold. The RSI indicator is testing its corresponding support level at 40, not yet raising any concerns of a imminent breakdown in price itself.
Short-term traders may want to wait for more evidence to help tip the scales. A break above converging resistance in the 17.80-90 zone would be a strong bullish signs and would open the door for a move up to 18.50 next. On the other hand, a breakdown back below the 200-day MA at 17.00 could target the 61.8% Fibonacci retracement of the ABCD pattern at 16.20 or lower.
For some reason, gold evokes more intense emotions for traders than any other financial instrument. Depending on who you talk to, gold is either the last real store of value amidst the final throes of the central bank driven fiat currency system…or a soft yellow rock with few industrial uses. Rather than dogmatically holding to either a permanently bullish or bearish outlook on any financial asset, we believe that traders that should keep an open mind and try to objectively analyze the fundamental drivers of gold Like any commodity, the price gold is determined by the interaction of supply and demand. While the supply of gold is relatively predictable in […]
As we go to press, gold is testing the bottom of its triangle pattern near 1186, but if that level is conclusively broken, a quick move down to 1180 is in play later this week. From a longer-term perspective, a breakdown from the triangle would suggest a measured move objective all the way down to the year-to-date low at 1140. Of course, gold may still manage to bounce from the bottom of its triangle today, but unless we see a bullish breakout above resistance at 1200, the odds favor an awakening for the bears that have been hibernating throughout the first three weeks of April.
After gapping higher over the weekend, the yellow metal briefly edged above 1220 before reversing and trending lower over the past three days. From a technical perspective, the pair is in a short-term bearish channel, and with today’s break below previous support at 1195, more weakness is favored from here. The path of least resistance remains to the downside, and gold bears may start to eye the three-week low around 1180 next.