Gold looking to make bigger move?

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gold technical analysis

The gold markets have been thrown around for quite some time. The last several months have been more or less a ‘chop fest’, as we have tightened quite a bit over that time. The market has formed a bit of a symmetrical triangle, and we are getting close to where it needs to break out in order to get things moving. The constriction of the gold market makes a bit of sense to be honest, as interest rates have been very volatile.

With the Fed suddenly looking hawkish, that in theory should be bad for gold, especially if the rate of change in American bond yields takes off to the upside quickly. We saw the Friday session present this correlation as the rates in America shot higher after the jobs number. Gold got slammed as a result. That being said we completely reversed the trend later in the day.

Technical Analysis

I have a weekly chart for you. This clearly shows a bit of a symmetrical triangle, sitting right above the 38.1% Fibonacci retracement level. This suggests that the move, if to the upside, will be very strong as we couldn’t be bothered to pull back any great distance. In theory, we should see ‘consolidation leading to continuation of the trend.’ You cannot bet on that without some kind of confirmation of the next move, but its something that is well known.

I also have three longer-term moving averages plotted on the charts. The red one is the 52 week EMA (1 year), the purple one is the 104 week EMA (2 year), and the white one is the 156 week EMA (3 year). This shows that we are clearly in an area that a lot of traders will be paying close attention to as well. That being said, EMAs are typically more or less an abstract guideline at best. Nonetheless, this shows just were we are.

Be patient. The trade is coming.

If we get a significant close outside of the triangle on the weekly chart, I think we will see a big move. To the upside, I think a move towards the highs at $2100 makes a lot of sense. To the downside, we could be looking at the $1600 region. That being said, the only thing you can count on is a shitload of noise. Keep your position size reasonable, but recognize a longer-term set up is trying to show itself.


Spot Gold Weekly Chart
Spot Gold Weekly Chart

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