Patience Required For Gold Investors

Over the years I have written extensively about gold and from an intraday speculative perspective there is, of course, always money to be made, whether long or short. But for the longer term investor in gold these are tough times where patience in abundance is required, which is why I have moved to the monthly chart for gold, which describes and encapsulates the current price action from such a perspective. And what this chart reveals, broadly speaking,that the precious metal has been trading in a $250 per ounce dollar range for almost 5 years.

From a technical perspective the key levels are clearly defined, and it comes as no surprise to see the volume point of control anchored in the centre of this long term price congestion in the $1300 per ounce region, and denoted with the yellow dotted line. As we can see from the volume histogram to the right of the chart, this has the heaviest concentration of volume on this timeframe, and substantially deeper than that when gold prices achieved the dizzy heights of $1800 per ounce and beyond back in 2012. Volumes are extremely thin both above and below, so for gold bugs the volume in the $1450 per ounce region and above looks very inviting, and should gold approach these areas then bullish momentum is likely to continue. The question, of course, is ‘if’ and ‘when’. And the same is also true to the downside, where thinner volumes await following any significant breach ofthe $1150 per ounce area.

Moving to the resistance and support regions, these too are also well defined, with the $1400 area acting as strong resistance, and further confirmed with the yellow pivot highs which have been the precursor to a reversal lower. To the downside $1125 per ounce and above has, to date, provided a platform of support, and over the last few months the prospect of a move higher has looked increasingly unlikely. Indeed last month’s price action is a classic example, where gold prices attempted to rally, only to close on high volume with a deep wick to the upper body of the candle – a bearish signal. Indeed the start of the year started in much the same vein, with ultra high volume on a relatively narrow spread candle, again indicative of weakness with the big operators selling into a weak market. March signalled further weakness with an attempt to rally once again failing on high volume, with April adding further confirmation to the current fragile picture for gold.