Gold bugs cheered, but for how much longer?

December gold futures - daily chart
December gold futures – daily chart

The last two weeks have been positive ones, and not just for equities, as gold bugs finally found something to celebrate with a return of some much needed bullish momentum.

From a technical perspective the key support level for the gold price was one that I referred to in a previous post, as denoted by the yellow dotted line in the $1280 per ounce level. This price level duly held, and indeed the precursor to the move higher was the combination of a gravestone doji followed by the long legged doji and associated high volumes. This combination of price and volume, coupled with the support platform, duly provided the requisite springboard for the current move higher.

However, as markets await the outcome of the FOMC meeting, the question now is where next for gold? And the answer to this can be found, in the part, in the volumes of the past few days.

Since mid October as the precious metal through the $1300 per ounce price point and beyond, volumes on the associated up candles have been falling, which is not a sign of strength, and certainly suggestive of a market that is running out of bullish momentum.

In addition, each of the accompanying price spreads have been narrowing – again a further sign of potential weakness. Furthermore, gold also appears to be struggling at the $1360 per ounce price region, which is once again being tested in today’s gold trading session.

The positive news, from a technical standpoint, is that the volume at price histogram now clearly defines the strong platform of price support below which extends from $1300 through to $1320 per ounce, and if we do see any reversal in gold prices, this should provide the requisite buffer to any move lower.

chart december gold futures
December gold futures – weekly chart

Moving to the weekly gold chart, this is also confirming the analysis above, and in particular the last two weeks where we have seen gold prices rising but on falling volumes, again not a good sign for gold bugs.

With the gold dollar relationship now apparently re-connected, much will depend on today’s FOMC statement and the question of tapering. The general view is that the FED will leave well alone, and indeed the markets already appear to have factored this in, and one only needs to consider the 10 year bond yield for evidence which at time of writing is trading at 2.51% and looks bearish.

By Anna Coulling

About Anna 1030 Articles
Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

3 Comments on Gold bugs cheered, but for how much longer?

  1. Anna what happened to the new book you were to publish? Forex for beginner’s. Was looking forward to reading it. You stated it would be available on Amazon. I have your other books and they are great. Look forward to your reply. Bob

    • Hi Bob – many thanks for your kind comments and delighted you enjoyed my other books. Your timing could not be better!! – Forex For Beginners went up on Amazon last night and I have included the link here for you. However, before you rush off and spend $2.99 – it will be available FREE for the next five days, staring midnight EST. So my suggestion would be to wait for a day or so, and then you should be able to download for free up until Tuesday night EST. Hope this is OK and if you do have any problems just drop me an email at anna@annacoulling.com but you will also find that the book is now in the sidebar of the site here with the link. All best wishes and I hope you enjoy the book, and many thanks again – kind regards – Anna

      • Thanks Anna,
        I appreciate the fast reply. I look forward to reading the book. I’ll leave a comment when done reading it.

        Sincerely
        Bob

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