Gold Under Careful Observation

The technical situation of gold didn’t change after yesterday's session. Will the 4-hour chart give us any clues about the next move?

Technical Picture of Gold

Gold Under Careful Observation - Image 1

Looking at the daily chart, we see that gold moved lower yesterday and tested the 2023 peak once again. Despite this downswing, bulls stopped their opponents and triggered a rebound, which left on the chart a red candle with a prolonged lower shadow (another pro-growth hammer).

Yesterday’s small decline materialized on a smaller volume than the earlier increase, which suggests that the sellers may lose interest in further attacks. Nevertheless, the sell signals generated by the indicators remain in the cards, giving them reasons to act.

Has anything new appeared on the charts today?

Gold Under Careful Observation - Image 2

From the daily perspective we see that no spectacular changes have taken place as gold is still trading in a very narrow range inside Monday’s candle around the 161.8% Fibonacci extension based on the late-Dec.-mid-Feb. downward move.

Let's zoom in to the chart and take a look at the 4-hour picture.

Gold Under Careful Observation - Image 3

In yesterday’s Quick Gold Alert, I wrote the following:

(…) gold is still trading above the 2023 high (…), which means that the overall situation in the very short term remains unchanged.

Nevertheless, taking into account the red declining wedge marked on the 4-hour chart, it seems that the moment of truth is just around the corner.

What does it mean for the price?

If gold bulls withstand the selling pressure and maintain the 2023 peak, the probability of an attack on the upper border of the formation (the red declining resistance line based on the previous 4-hour highs) will increase. In this case, we’ll likely see further improvement and (at least) a test of the red gap ($2,179.50-$2,180.80) formed on Thursday in the following day(s).

From today’s point of view, we see that the situation developed in line with the above scenario, and the buyers broke above the upper line of the red rising wedge earlier today.

Although this is a positive development, there was no spectacular increase, which may probably be related to the current situation on the 1-hour chart.

What do I mean by that?

Gold Under Careful Observation - Image 4

Looking at the above chart, we see that the CCI and the Stochastic Oscillator generated sell signals, which suggests that another downswing and a verification of the earlier breakout (or even a test of the lower line of the green rising channel) could be just around the corner.

Nevertheless, if gold invalidates the breakout above the red resistance line the bears may want to also test the recent lows and the major support – the 2023 peak later in the day.

Summing up, although gold re-tested the 2023 peak, the overall situation in the very short-term picture remains almost unchanged as the key support (2023 peak) continues to keep declines in check. Therefore, in my opinion, as long as there is no daily closure below it, a bigger move to the downside is not a sure bet, and waiting at the sidelines for more clear technical signals seems to be the best choice at the moment.

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See you tomorrow.

Anna Radomska