Over the last few days, gold bulls have lost some of the recent momentum, so it has been no surprise to see the precious pause and retrace as we come to the end of the month and quarter, with the G20 also in focus. So where next for gold?
And this week has delivered some interesting signals from the perspective of volume price analysis. Monday began with a solid up candle on good volume and confirming a follow through on the very bullish sentiment of the prior week. Tuesday was then significant, closing as it did with a strong shooting star candle with a very tall wick to the upper body, and on very high volume signalling a sell off to come. This was no surprise following the surge higher from $1360 per ounce, as the metal moved through the $1430 and $1440 per ounce levels with ease. And since Tuesday we have seen a modest fall take place, but note two aspects here. First, we have falling price and falling volume, not a sign of strength in the move lower, and the second is the deep wicks to the lower body of both candles. In other words, the selling is being absorbed, and whilst the bullish trend has temporarily run out of momentum, this suggests the move lower is seen as a buying opportunity, with higher prices expected in due course.
Moreover, as can be seen on the volume histogram of the volume point of control, there is light volume ahead back to the $1440 per ounce level and beyond which will require little effort to penetrate and should we see further weakness in the US dollar, this will add another dimension of bullish sentiment to gold, all confirmed by our Quantumtrading trend monitor indicator for NinjaTrader.