Talking Points:
- Gold Prices have put in an aggressive bullish movement, but have yet been unable to take out the double-top formation around $1,296.
- Current price action is finding support off a key Fibonacci level, but Gold prices have been moving violently around the recent theme of risk aversion.
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Gold prices have been on quite the run over the past month. After bottoming out below $1,205 in July, buyers have returned with gusto to drive price action towards the double-top formation at $1,296. The move appeared to start as another gust of weakness was developing in the U.S. Dollar in the early part of the month; but more recently, an uptick in geopolitical tension drove an extreme bullish move in Gold prices as the yellow metal made a near-parabolic ascent towards that prior point of resistance (this is outlined in green on the below chart).
Gold Four-Hour: Bulls Return to Drive Prices Towards Double-Top Resistance at $1,296
Chart prepared by James Stanley
This near-term move of strength has also seen the longer-term descending channel taken-out, as Gold prices found support on the projection of the trend-line that exists from the July-November, 2016 highs. While price action peeked out of this channel previously in June, support didn’t show-up on the daily chart. Instead, prices ran into April resistance, at which point sellers took over. But the driver on that move appeared to be rather clear, as this took place right around the time of James Comey’s testimony in front of Congress.
Gold Daily: Support at Prior Resistance (Descending Trend-Line Projection)
Chart prepared by James Stanley
The driver behind the most recent incline in Gold prices appears to be jitters around the U.S. stand-off with North Korea over the DRRK’s nuclear ambitions. A tweet was sent last Tuesday around Noon Eastern Time in which U.S. President Donald Trump spoke on the matter, saying that nuclear threats from North Korea would be met with ‘fire fury, and frankly, power the likes of which the world has never seen’.
Gold prices promptly moved-higher after that tweet, and continued to run for the rest of the week. As we opened this week, a bit of calm showed across global markets and Gold prices retraced down to a key level of support. At $1,278.76 we have the 61.8% retracement of the July-December 2016 major move; and this level is helping to set near-term support so far on this early week.
Gold Prices Bid After Trump’s ‘Fire and Fury’ Tweet: Current Support at 61.8% Fib
Chart prepared by James Stanley
The challenge with the Gold trade at the moment is that this appears to be firmly-aligned with the global risk trade. As risk aversion shows with a bit more prominence, Gold prices have caught a significant bid to jump-higher on the back of that theme. This can be a difficult time looking for trend-continuation setups, as the move on both sides of Gold can be rather sharp.
For traders looking at taking on exposure in Gold, a breakout of the $1,296 double-top formation can open the door to bullish continuation strategies. A series of potential resistance levels residing above current prices can be used to allocate profit targets. The Fibonacci level at $1,315.60 could be particularly attractive to such an approach, as this is the 76.4% retracement from the same set of levels that helped to set current support.
Gold Daily: Potential Resistance Levels Above $1,296 Double-Top Applied
Chart prepared by James Stanley
--- Written by James Stanley, Strategist for DailyFX.com
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