The first quarter rally for gold appears to have run its course, with the precious metal now consolidating in a relatively tight range as bullish sentiment for commodities in general starts to ebb and drain away. In the last two months we have seen two key days of price action which define the current technical picture, with the first of these occurring on the 11th February, and the second on the 4th March, with the common theme being a dramatic increase in volume on the daily chart. On the first occasion, the market rose strongly on the day, and delivered a volatility trigger with the classical response of subsequent price action reverting back inside the spread of the candle with no follow through, and trapping bullish traders into weak positions. This was as expected with prices duly languishing in this area for some time, until the second significant candle appeared on the 4th March, once again with ultra high volume with no follow through into higher prices. This candle was duly followed with two pivot highs over the course of the next few days, as gold prices struggled to break through the $1285 per ounce area before sliding lower and reverting back to test the volume point of control which is now balanced in the $1240 per ounce area, as denoted with the purple dotted line. Below we now have potential support building in the $1208 per ounce area, and in early trading today, gold is now testing the high volume node at $1220 per ounce, but if this fails to hold, then we can expect to see gold prices sell off once again and back to test the low volume node now awaiting in the $1190 per ounce area.
The weekly chart confirms the bearish sentiment now building for gold, with last week’s deep shadow to the top of the candle telling its own story, and with the VPOC on this timeframe now waiting in the $1190 per ounce area, this appears to be the next pause point for gold in the short term.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading