Monthly Gold Chart Offers Some Insight On Yellow Metal's Future
Anna Coulling | Jul 26, 2021 09:38AM ET
Attempting to forecast the future direction for gold is proving tricky at present from a daily perspective, so in order to offer a longer-term perspective, I have stepped down to the monthly chart to see if we can gain a better insight into the outlook for the precious metal.
Looking at the chart, the best description of the price action would be ‘wallowing in congestion!’
The long-legged Doji candle of August last year was the pre-cursor to the current indecision that has remained in place ever since, albeit with a bearish overtone with prices sliding lower.
Perhaps the most significant price action was in May and June 2021, where we had two up candles – the second of which was very strong. However, this was followed immediately by the subsequent month’s strong down candle. What this means, in effect, is if we overlay one on top of the other, the resultant candle is one with a small body and deep upper wick. In other words, it is a sign of weakness, which is further reinforced by the trend monitor indicator that is beginning to transition from bullish to the dark red of potential bearish sentiment.
Moreover, as can be seen, the price-based resistance denoted with the blue dashed line of the accumulation and distribution indicator at $1,920 per ounce also came into play, capping May’s advance in a price region where previous rallies had stalled last year. In addition, as the metal consolidates, the volume builds on the VPOC histogram, adding to the general malaise and a further layer to the labored progress higher.
Remember, volume on the VPOC histogram acts in the same way as price-based support and resistance. The heavier the weight of volume on an area, the greater will be the effort required to move through it.
So in summary, all we can say at present with any degree of certainty is that the bullish tone for gold of 2020 has not translated through into 2021. It seems we are set for further congestion as the metal struggles to move away from the $1,800/$1,900 per ounce region while developing an increasingly bearish tone. To the downside, volume on the VPOC histogram falls away as we approach $1,700 per ounce with a low volume node following. So any sustained move lower will require significantly less effort should the metal fall this far.
The bright spot on the horizon for gold is inflation, but even this seems to have dimmed over the past few months. Until it reappears with conviction, it will remain a glimmer of hope for gold bugs.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.