Gold futures continued to trade in an extremely narrow range again yesterday, ending the trading session as a tiny doji candle and replicating the price action of both Tuesday and Wednesday.
Indeed, since Friday last week the precious metal has been contained within a trading range of 22 ounces and appears to be following a similar pattern today, having opened marginally higher at $1582.70 but now trading lower at $1578, at time of writing.
From a fundamental perspective there are a number of reasons for gold’s recent poor performance. First, the strong move into equities which has seen benchmark indices such as the Dow hit new highs. Second, a strong move out of gold backed ETFs with February outflows the highest on record.
In addition, the lack of any inflation is also impacting demand for gold as a hedge and lastly dollar strength has also played its part.
Moving forward and from a technical perspective, the short term floor for gold is now in place at $1554 per ounce and is shown on the daily chart by the dotted line and also clearly defined by the isolated pivot low. For gold bugs this is now the “line in the sand” as any breach here will send the metal down to test the $1540 region last seen in May 2012 and any move beyond here could well see the $1500 per ounce price point tested in due course.
By Anna Coulling
Come and join my live training room and discover why in today’s complex markets price behaviour holds the key to your trading success.
Leave a Reply