Gold Is Doing Its Best
Anna Coulling | Mar 25, 2021 10:38AM ET
Gold is doing its best to battle back, but finding it a real struggle on the daily chart. With a congestion phase now developing, some important levels of resistance are building as a result. As I’ve outlined in previous posts, we have seen many attempts to rally over the last few months, but all have been snuffed out rapidly as bearish sentiment continues to remain dominant. However, on this occasion, we have seen the rally off the $1,680-per-ounce price point. It is one that continues to hold well above $1,700 per ounce, as the metal trades at $1,728 per ounce at the time of writing.
What is also interesting is the transition of the trend monitor from dark red to dark blue, thereby, sending a signal of a possible reversal ahead. In other words, as Wyckoff would have explained, from a primary trend lower to a primary trend higher. We will see in due course, and no doubt it will be helped by talk of inflation.
Returning to the technical picture: First, we have a strong level of resistance building, as can be seen by the red dashed line of the accumulation and distribution indicator at the $1,74-per-ounce level. This was tested yesterday and again this morning and, hence, is significant. It is one that will need to be breached if any bullish sentiment is to build longer term. And should this level be breached on good volume, this resistance will then become support and provide a strong platform for any recovery. The good news is that ahead we have a low volume node at $1,760 per ounce and, therefore, we can expect to see the price action move through here with ease before it hits further volume-based resistance around the $1,800-per-ounce level.
If we move to the weekly chart, the reason for this congestion period is instantly clear, as we have the VPOC itself denoted with the yellow dashed line at $1,740 per ounce. So expect to see the current congestion phase continue for a while. Note also on this chart the fall in volume over the last two weeks. So an attempt to rally on volume, which is declining, is not a sign of strength. So I expect to see further congestion, as we saw in the mid part of last year before any meaningful move higher.
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