Gold Technical Outlook:
- Gold short-term range conditions as tight as they can get
- Highly influential support around the 1915-line
Gold has been going nowhere lately, treading water in a fashion that is rarely seen. The 5-day range when adjusted for current realized volatility is as tight as you will see it, ranking as the smallest range since December 2019.
There have been several other times since then when conditions were nearly as tight, and each time some level of volatility came into the market in quick order. Sometimes tradeable, sometimes not. What I mean by that, is a range doesn’t always resolve in a manner that gives good signaling for taking a trade.
The range is contracting and thus not only tight but continually tightening – this is making for a descending wedge. The wedge is forming on a big level of support around the 1915 level. It dates to the June 2021 high, went dormant, but has been very much in play since February.
It’s not a perfect level, but you can see it has either held or been quickly and then held again on numerous occasions over the past few weeks. This creates a floor for the wedge and should we see the top-side trend-line of the wedge break, then it the upside could come quickly with the top of the wedge eyed as another breakout level at 1966.
If the floor breaks and momentum starts pushing gold below 1915 watch to see if it can pop back above and prove itself even further to be a worthy level of support. A breakdown that shakes out weak hands and recovers back above support will be viewed as a bullish signal.
A test or break of the 1890 low and reversal back higher could be the ideas scenario as a sharp move down and quick reversal higher (i.e. Mar 16 & 30) will give even more indication that gold wants to resolve itself higher. With that said, if gold breaks down and closes below either 1915, or worse 1890, then the outlook flips towards the downside.
For now, continuing to give the benefit of the doubt to support and the broader uptrend. It looks like it is only a matter of time measured in a few days at most that we see gold go on the move again.
Gold Daily Chart
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—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX