It’s a sorry tale of woe for gold traders and investors at present as the precious metal shows few signs of reversing the current bearish trend on the daily chart. Longer-term of course we can expect inflation to hold out its bloated hand which will help the metal recover as investors seek it out as a hedge, even more so with a commodity supercycle on the horizon and the softs already leading the charge. However, for the time being, and in the short term, the outlook is weak.
In the past couple of weeks, we have seen some typical price action develop, with the promise of any recovery quickly snuffed out by the bears. The first of these was in mid-February with the rally weakening after four days and running into resistance at the VPOC (volume point of control). We can see this based on the narrowing spreads and falling volume, both signs of weakness which was then followed by the reversal into a price waterfall on rising volume thereby confirming the bearish picture. This was repeated later in the month with a classic price waterfall on rising volume. Yesterday’s candle also looks weak as gold tried to rally intraday but was snuffed out by selling and closing with a deep wick to the upper body on good volume.
Moving to the weekly chart, this offers little comfort either with the trend monitor remaining steadfastly red and rising volume on last week’s down candle, and should this longer-term weakness continue we may even see the price move back to the VPOC (volume point of control) below $1600 per ounce and shown with the yellow dashed line. One would hope not, but given the lack of buyers at present or the strong driver of inflation, this is possible.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
Leave a Reply