Gold looking set to break out – but when?

Gold price chart for gold futures
Daily Gold Chart – December Gold Futures

The gold market has continued to trade in a relatively narrow range once again today, with the December gold futures contract marginally above this morning’s open at $1727 per ounce, and now trading at $1729.10 per ounce, but showing little enthusiasm for any sustained move higher or lower. This has been a feature of gold for the last few weeks, as the market continues to consolidate between the isolated pivot low of early November at $1672 per ounce, and the isolated pivot high at $1739 per ounce, with both points now clearly defining the extremes of the current range. Whilst the bias in the last few days has been to the up side, the market has failed to follow through, and  is now beginning to look increasingly weak once again, particularly given the recent failures at this level, with the price of gold failing to breach the $1736 level on both Monday and Tuesday. Despite this however, the daily trend dots have since reverted to green in the last two days, but the trend itself remains flat, and the picture across the other indicators is equally mixed.

On the daily chart, buyers have returned in the last few days, but not with any great commitment as shown by the height of the volume bars, which are only just above average, and certainly well below any sustained buying. In addition, volumes throughout the last few weeks have been low, with only the selling volume bars above average. On the three day chart, we see a similar picture. Buyers have yet to re-appear, and the three day trend remains firmly bearish. So given the mixed picture at present, where is the price of gold heading next, and the answer to this questions likes in the chart – as always!

The congestion region for gold is now clearly defined on the daily chart and the two levels to watch are $1740 per ounce to the upside, and $1670 to the downside. If the upper level is breached with a clear break and hold, then expect to see a recovery for gold, and a move higher to test the price congestion in the $1760 to $1800 per ounce region, whilst a breach of the $1670 will see the price of gold break lower and down to test the $1625 per ounce level. The key indicator to watch now will be the three day trend. If it remains bearish, and the buying volumes on the daily chart remain low, then expect to see a break lower. For a move higher we need to see a sustained flow of buying volume, preferably increasing and rising, with the rising trend to deliver the momentum that the market now clearly requires. So for longer term trend traders in gold, it’s a question of remaining patient, and waiting for the market to break. For intraday scalping traders there is still money to be made, but with low volatility, it is becoming increasingly difficult, and it may be best to sit and wait for more sustained price action, once the breakout from the current trading range has been initiated. Always hard to sit on the sidelines of any market, but this is certainly the best option with gold right now!

By Anna Coulling

About Anna 1064 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.

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