Summary:

• Gold has drifted lower this week after respecting long term resistance
• Price is now back close to where it traded ahead of the US CPI release
• FOMC minutes tonight and risk sentiment 2 factors to keep an eye on

A sharp move higher in Gold last week has bulls licking their lips in anticipation of a major  breakout but unfortunately for Gold bugs, this never materialised and a reversal on Friday has continued this week with price drifting back lower.

 Gold printed a bearish reversal on Friday near the prior resistance and for now remains in the range from 1306-1365. Source: xStation

Taking a longer term perspective the region from 1360-1375 has provided a ceiling for the last 4 years now and despite looking like the market is attempting to carve out a longer term bottom the market needs to break above there to make any significant gains. Since making an all time high above 1900 back in 2011 the market has dropped significantly but the last couple of years have seen a possible bottoming formation occur. Having said that a break above 1375 is still needed for any sustained move to the upside to play out.     

 After breaking above a falling trendline from its all-time high last August the market looked like it could be set for a prolonged move higher but resistance at 1375 has remained insurmountable for now. Source: xStation

From a more recent perspective the market has now completed a mini round trip from last week’s CPI release. Price was trading around the these levels ahead of the data before the market took a sharp drop after a higher than expected reading. The move proved to be a bear trap and in fact led to an even stronger move to the upside although this itself also proved to be a false dawn as the longer term resistance level identified earlier once more stood firm. 

 Gold has now returned to a similar level to that which it trading ahead of last week’s CPI release. Source: xStation

Looking ahead the two main driving forces for this market will likely be tonight’s release of the FOMC minutes and also any change in the overall risk sentiment. The most recent Fed meeting was something of a non-event and when you also consider that the meeting preceded the recent swoon in stocks expectations for anything market moving are fairly low. 

For the second driving force of risk sentiment it is worth noting that Gold was remarkably subdued during the recent rout in equities with the traditional safe haven flow into the precious metal oddly absent. However, should we get another run lower in the markets we could see investors pile into Gold and should it break through the longer term resistance zone around 1360-1375 then a major breakout could occur.