The start of a new trading month and with markets quiet for the Labor Day holiday in the US, is a good time to consider the monthly charts for a longer term perspective, and one such is gold which has been characterized by a volatile trend higher. And volatility is the watchword, as twice in the last three months the wild price action has triggered the volatility indicator in this timeframe. An unusual occurrence, but sending a clear signal of the extremes we are currently witnessing in terms of risk sentiment for the precious metal as investors seek the sanctuary of safe havens.
Throughout the phase of price action from May onward, we have seen rising volume, a positive sign for gold, whilst the August volatility candle resulted in spiking the gold price to a high of $1565 before closing out at $1529.40 with the price action moving back into the spread of the candle.
The Quantum volatility indicator is based on average true range and when triggered signals either congestion or a potential reversal, and therefore for gold we can expect to see the metal trade within the spread of this candle before continuing higher, with any upwards trend not re-established until we see the August $1565 per ounce high taken out. The good news for gold investors is once this occurs, the price action takes the metal into a low volume node on the histogram to the right of the chart which stretches from $1570 per ounce through to $1600 per ounce as we move ever further from the volume point of control, itself anchored at $1330 per ounce below. Moreover, once the price action enters a LVN we can expect progress to be swift.