- Gold closed last week at highest level in a month
- Price is holding a trendline from Dec 2016 low
- Yesterday saw bearish engulfing candlestick
The last two sessions have been volatile ones for Gold with Friday seeing a strong move higher before sellers stepped in yesterday to erase the gains. The market has traded inside this range today and given the strength of these moves there could be a breakout coming after what has been an unusually quiet period for this market. Let’s now look at the charts over multiple time periods and analyse what is happening in this market.
Gold remains above a rising trendline from last December’s low. Source: xStation
Last week saw the market end at its highest level since early October, largely thanks to a surge higher on Friday. Since making a low around 1120 last December the market has been moving steadily higher. However a rising trendline form this low is currently close to the market and a break below it could be seen to signal an end to the uptrend. The trendline currently comes in at approximately 1270.
Gold has dropped below the Ichimoku cloud on D1. Source: xStation
More recently there have been some bearish technical developments in the market with price falling below the Ichimoku cloud on D1. Not only is price below the market but all 3 accompanying lines have also crossed below the cloud further supporting the break. A break above the cloud back in July preceded a strong move higher of almost $100 and now with price below it there is some indication of a trend change. The bottom of the cloud around 1290 is the first area to keep an eye on as possible resistance with a rally into the cloud on Friday being met with a bearish engulfing candlestick yesterday.
Gold and Tnote have diverged in recent months with the former lagging the latter in moving lower. Source: xStation
Gold has previously shown a good correlation with the US ten year bond (Tnote on xStation) but lately there has been a large divergence appearing. The Tnote has been declining fairly steadily since the end of the summer and whilst Gold also fell from its 2017 peak around that time, the precious metal has held up significantly better. If the Gold price fell back inline with the current price of the Tnote it would have to drop around $60 to 1220.
From a weekly perspective Gold is clinging on to the uptrend that has provided support for almost a year. On shorter time frames however there are signs that the trend has turned with price falling below the Ichimoku cloud on D1. The four hourly chart reveals a disconnect between Gold and the Tnote which could be seen to suggest downwards pressure on the precious metal. A break below 1270 would see price fall below the rising trendline on W1 and pave the way for a substantial decline.