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Gold Technical Observations – 7/28/2017

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Joel BaumanThis article was submitted by Joel Bauman, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.

In this article focuses on the gold market through the lens of technical analysis. Technical analysis is a subjective form of analysis that requires a critical eye for price patterns. The goal is to use past price data to help forecast future price movement. While the focus is on gold, these observations may be extended to the silver market given their positive correlation.

Please note: this article is not a recommendation to buy or sell. SchiffGold does not encourage individuals to trade financial assets. There is a high degree of risk involved in trading, as past results are not indicative of futures returns. Any analysis given in this article is exclusively for educational purposes.

Review of this Week

We had a semi-bullish week. Gold opened at $1,255 and closed at $1,271, for a net gain of $16. Overall, this was a relatively quiet week. With the lower market volatility we’re not seeing much follow-through. This it what most traders call “a range-bound market.”

Looking at the price action on the weekly chart, momentum tilts to the downside. This fact, along with the addition of the recent failures to break $1,300, indicate a short term price reversal may come as soon as next week.

This week closed on the highs, $1,271. This lends itself to a bullish open on Sunday. With momentum spillover from this week to next, it’s possible gold could rally up to $1,280-$1,285 on Sunday night, and then reverse late Monday morning

For gold to move higher and not reverse, we need to see consolidation (sideways price action). Looking at the peaks of the last two rallies (April 17 and June 6) there was little to zero consolidation. I expect we’ll again see little to zero consolidation as gold pulls back to the 200 period moving average ($1,230).

Overview and Outlook for 2017

The volatility has been low this year across most financial markets.

Gold is no exception.

Traders who profit in market volatility haven’t fared well. The commodity trading desk at Goldman Sachs recently reported its worst quarter on record. I expect this season of low volatility to continue, as gold trades between the swing low of $1,130 and $1,300.

These two price levels are worth watching.

$1,130 is a key support level. The $1,130 swing low formed in December of 2016 after gold’s post-election decline from $1,300s. The $1,130 swing low acts both as a retest of the 2015 price lows, and it is the first “higher low” since May of 2012. If we see gold consolidate and close below $1,180 I expect a swift retest of the $1,130 swing low.

$1,300 is a key resistance level. In the last two and half years, we’ve seen six distinct failures to both consolidate and close above $1,300. For this reason, I would be skeptical of bullish moves until gold consolidates and closes above this level.

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