Gold futures continue to trade in a relatively narrow range moving between 1360 per ounce to the downside and 1420 per ounce to the upside, as the gold market once again pauses, and prepares to move higher in the longer term.
Last week’s minor reversal found support in the 1375 per ounce price region which duly held firm on Friday with a bounce back to close the week at 1386.50 per ounce, supported by good volume.
The technical trigger for weakness in the last 10 days was the shooting star candle at the end of August, whose effect is still in evidence. The current price congestion is clearly evident on the volume at price histogram with three deep bars which extend from 1360 per ounce through to 1440 per ounce. This is the price region which now needs to be breached.
From a fundamental perspective all the signs are positive, with two potential catalysts in the pipeline. The first may be further instability in the Middle East, as traders and investors seek out gold’s safe haven status, and the second a result of the onset of the FED tapering their bond buying program. Either could have a significant impact, and coupled with dollar weakness we can expect to see gold continue its recent bullish tone, and move beyond 1440 per ounce in the medium term.
By Anna Coulling