Gold Price Talking Points
– After a bullish move from a key zone of support, Gold prices turned around at resistance following the Wednesday outlay of ECB and FOMC meeting minutes, and Gold price action is now fast approaching the support zone that’s held the lows through 2019, at least so far.
– As Gold price action digests, going along with a number of other macro markets doing the same, the big question is what the next directional move might be, and this appears to be inextricably linked to the US Dollar. If the USD can breakout of its ascending triangle formation that’s been brewing since Q4 of last year, bearish strategies in Gold can soon become attractive. But – if USD continues to congest with bulls pulling away from that yearly high, the topside of Gold can remain as attractive, looking for a continuation of the late 2018, early 2019 bullish theme.
– DailyFX Forecasts are published on a variety of currencies such as the US Dollar or the Euro and are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.
Do you want to see how retail traders are currently trading Gold prices? Check out our IG Client Sentiment Indicator.
Gold Price Digestion Continues into Second Month
In the second week of Q2, the patterns of digestion across a number of macro markets continued. While the Wednesday outlay of the ECB and FOMC Meeting Minutes from the March rate decision had the potential to prod breakouts, only more digestion was seen. This may be setting up global markets for a big breakout at some point later this year but, for now, traders are forced to work with what they have; which is a stream of digestion or congestion-based setups across many of the world’s largest markets.
In Gold prices, digestion has been showing for a couple of months now. Gold came into 2019 with a full head of steam, continuing a bullish move that started in mid-August of last year when the yellow metal hit a low around 1160. At that point, bulls re-grabbed the reins and Gold prices perched all the way up to the 1340 area by mid-February. Since then, however, digestion has been the name of the game as prices have built into a descending triangle formation, taken from horizontal support at the 1281 area, combined with a series of lower-highs from February, March and then April.
Gold Price Four-Hour Chart
Taking a step back, and focusing in on that area of support, traders may be able to gleam another type of approach. The January swing-low came-in around 1276; and this is just above a key Fibonacci level at 1275.55. The March swing lows approached this price but, bulls stepped-in before hand to produce a higher-low on the chart. A follow-through support test in early-April saw the same March low respected but, in the ensuing bump-higher, another Fibonacci level came into play around 1286, which is the 61.8% Fibonacci retracement of the 2013-2015 major move in Gold prices.
The net of which produces a large zone of support that, so far, has helped to hold the 2019 lows in Gold prices.
Gold Price Eight-Hour Price Chart
Gold Price Trading Strategy
Given the above backdrop, and there’s a case to be made on either side; although traders would likely want to evaluate the landscape in the effort of seeing which setup fits with their overall market view.
For those looking at bullish themes in the US Dollar, carrying the expectation that the brewing ascending triangle will soon face a topside breakout, the short-side of Gold could be attractive, and traders would likely want to focus-in on the shorter-term descending triangle looked at above. A downside break through 1280.50 support could open the door for moves towards 1260 and then 1250.
Gold Price Four-Hour Chart
For traders that are expecting the FX market impasse to hold, at least for now; the longer-term backdrop in Gold becomes more attractive. This approach would likely be looking for a support test, with a hold of the lows above that March swing around the 1280.50 level. If prices do dip below 1280, bullish strategies could still remain as an option; provided that buyers hold price action above the 1275 bottom of that support zone.
The Market in GLD
As discussed in Tuesday’s piece, the GLD Exchange Traded Fund is a popular way for US traders and investors to get exposure into Gold prices. But – given the open/closing times of US exchanges, it does create a less fluid backdrop filled with gaps that can make shorter-term technical analysis a bit of a challenge.
But – the zones and levels discussed above have bearing on the GLD chart. The support zone of relevance in Gold prices could be plotted on GLD around the 121.00 level, as there are two longer-term Fibonacci levels straddling that price.
GLD Four-Hour Price Chart
Chart prepared by James Stanley
To read more:
Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q2 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.
Forex Trading Resources
DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.
If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.
— Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX