The longer term bearish trend for gold investors was reinstated with a vengeance yesterday, as comments from the FED finally added some structure to the long awaited interest rate rise, sending gold sharply lower on the news. For a longer term perspective on gold, the weekly chart is perhaps the most demonstrable, with the failure to breach the volume point of control three weeks ago in the $1190 per ounce region, the most significant. The failure to breach this region was no surprise given the depth of transacted volume at this level, and has duly provided a strong region of price resistance, with gold prices subsequently falling last week on above average volume. For this week, the price is now dominated by the last two days, with the strong move higher, and equally rapid move lower creating the deep week to the candle now forming, and should the market duly close tomorrow with such a formation on high volume, this will then mark the end of the short term bullish rally.
For a sustained move lower the key levels below are now at $1140 per ounce, where a platform of potential accumulation awaits (as shown with the blue dotted line on the accumulation and distribution indicator). This is an area that has seen accumulation in the past when approached from above, and in addition is also aligned with a high volume node on the VPOC indicator itself, suggesting we may see a pause at this level. Below, any subsequent support is then waiting in the $1080 per ounce area, a level tested earlier in July this year. If this level is taken out then gold prices will continue to fall and extend the current longer term bearish trend which has remained firmly in place for the last 2 years. Moreover, with the fundamental drivers now taking hold once again, it’s not a pretty prospect for gold bugs or investors. Furthermore, any meaningful rise in the price of gold will not occur until we see a buying climax in the longer term timeframes, a scenario which is likely to be preceded with some dramatic falls. For gold traders on an intraday basis, it is simply a question taking advantage of the strong two price action currently in play, and applying volume price analysis, and thus anticipate direction accordingly.
By Anna Coulling
Charts by NinjaTrader and indicators from Quantum Trading