The positive start to this week for gold, was in sharp contrast to last week’s lacklustre performance, which saw the precious metal trade in a tight range between $1279 per ounce to the downside and $1290 per ounce to the upside, so Monday’s wide spread up candle on excellent volume was a refreshing change. The question now is whether this injection of momentum for gold is simply a one hit wonder or is likely to deliver further bullish momentum in the short term.
From a technical perspective, there are several aspects to consider. First, we have two levels of price resistance now developing ahead at $1304 per ounce and $1307 per ounce. The first of these is denoted with the blue dashed line and the second with the red. These are significant areas of potential resistance and indeed yesterday’s price action tested the $1304 per ounce region before closing well off the highs of the session with a down candle.
Second, we have the volume point of control now anchored firmly at $1294 per ounce and as such likely to see further consolidation around the area at the fulcrum of price agreement. Whilst this level denotes the heaviest concentration of volume, this also extends further up the daily chart and all the way through to $1320 per ounce, adding further layers of resistance based barriers to progress higher.
In summary, in the short term we are likely to see further congestion in the current trading range, but if the price based resistance levels up to $1315 per ounce and beyond are breached with good volume, this opens the way for a more sustained move higher towards $1325 per ounce and beyond.