Trading in a narrow range. But for how long?
In today’s gold price forecast, I decided to share with you my insights from Friday’s Quick Gold Alert. Have a nice read!
Technical Picture of Gold
Looking at the above charts, we see that the overall situation in the short term hasn’t changed much as gold futures are still trading between two key support/resistance lines: the previously broken upper border of the green rising trend channel and the red line based on the Aug.2 and Aug.20 peaks, which continues to serve as the nearest support.
Additionally, the green gap ($2,677-$2,682.80) from Wednesday (marked on the daily chart) remains open, which means that yesterday’s comments remain up to date also today:
In yesterday’s Quick Gold Alert, you could read the following:
(….) the situation developed in line with the above scenario, and gold futures extended gains, breaking above the mentioned upper border of the green rising trend channel and the barrier of $2,700, hitting a fresh all-time high of $2,708.60 earlier today.
Thanks to today’s upswing, gold bulls also broke above the upper line of the very short-term purple consolidation, which opened the way to $2,709.35, where the size of the upward move would correspond to the height of the formation.
Despite the earlier improvement buyers didn’t manage to realize this minimum range of the move, which showed their (at least temporary) weakness that triggered a pullback, which took the price under the previously broken resistances.
In this way, gold futures invalidated the earlier breakout above the upper border of the green rising trend channel and the barrier of $2,700, which doesn’t look encouraging (at least at the moment of writing these words) for the bulls.
What does it mean?
In my opinion, a test of the red line based on the Aug.2 and Aug.20 peaks, which is currently at around $2,682.50 and serves as the nearest support.
What’s next?
If it withstands the selling pressure, we’ll likely see another attempt to break above the upper border of the green rising trend channel and the barrier of $2,700.
However, considering today’s small show of gold bulls’ weakness (a lack of strength to achieve the minimum growth range after leaving the mentioned purple consolidation), it seems that further deterioration may be just around the corner.
Nevertheless, just like yesterday, please keep in mind that, in my opinion, such price action will be more likely and reliable only if the bears manage to push the price under the mentioned red line (based on the Aug.2 and Aug.20 peaks) and confirm invalidation of the earlier breakout above this important support/resistance line.
In this case, we’ll likely see further deterioration and a test of yesterday’s green supportive gap ($2,677-$2,682.80) marked on the daily chart.
However, if the sellers manage to close it, the way to the next support zone created by the previously broken Sept.18 peak of $2,627.10 and the 38.2% Fibonacci retracement (marked with the red ellipses on the 4-hour chart) will be open.
Connecting the dots, the moment of truth is approaching fast, and the direction of the next bigger move will be probably clearer after today’s session.
Nevertheless, before the summary I would like to draw your attention to the new consolidation that has appeared on the 4-hour chart (marked with blue rectangle).
From this point of view, we see that gold futures are currently trading not only between the above-mentioned key support/resistance lines, but also inside the blue consolidation ($2,708.60-$2,677.90), which means that the breakout above the upper line of the formation (or breakdown under the lower line) will likely indicate the direction of the next very short-term move. (…)
Summing up, the overall situation in the short term hasn’t changed much as gold futures are trading inside the blue consolidation (marked on the 4-hour chart) between the key support/resistance lines. Therefore, in my opinion, keeping an eye on the borders of the consolidation could be the key to further profitable trades. Stay tuned.
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Anna Radomska