Hawaii Six O - Gary Wagner
Conclusion Or Consolidation
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Gold continues to trade in a narrow and defined range with dollar strength or weakness defining the majority of the net price change on any given day. As of 5:00 PM Eastern standard time spot gold is currently fixed at $1288.80 after a net decline today of $2.40.
According to the KGX, (Kitco gold index) traders have actually bid the precious yellow metal higher by $2.10, however dollar strength far exceeds bullish sentiment as it took away $4.50 per ounce.
On Friday, January 4th gold pricing had a range of $22 from the intraday high, ($1300.40) to the intraday low, ($1278). Since then every trading day, currently seven, have all contained a daily range with lower high and higher low than the high and low achieved on the 4th.
There have been multiple attempts to challenge current resistance at $1300, on four of the last seven trading days.
On Monday, January 7th gold traded to a high of $1297. On Thursday, January 10th gold traded to a high of $1298. Yesterday’s high was $1296, above today’s high of $1294.80.
The $64,000 question is whether or not the recent consolidation and compressing range is signaling a conclusion to the dynamic rally, or is trading sideways as it forms a base at these new levels above $1280 before breaking above $1300 per ounce.
On a technical basis as long as the range continues to compress there is no real information to glean from price action. Until gold pricing breaks above or below current support and resistance there is no definitive answer.
Although the identification of a flag formation typically favors a return to the existing prevalent trend direction when pricing hits the apex, releases energy and spikes, it is not guaranteed.
While a price break to the upside would seem to be the most logical direction for gold pricing, each unsuccessful attempt to trade and close above $1300 diminishes the probability of that outcome. More so the most recent unsuccessful attempts to trade and close above resistance have resulted in a lower high than the previous attempt. This action would seem to favor the assumption that this current rally might in fact conclude at current pricing.
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Wishing you as always, good trading,