Gold – Finds Support After Touching Five Year Low

Gold has looked quite bearish for some time now and today it has broken through another support – $1,142.73, 17 March lows – having failed at the first two times of asking.

Gold daily

The next key support level lies around $1,131.50, a break of which would see Gold trading at its lowest level since 19 April 2010. The move following the break of the previous level has been quite aggressive and already we’re seeing the new support being tested.

Gold Weekly

If this holds on the first attempt, the first clear resistance will be $1,142.17, previous support. Quite often old support levels turn into resistance and vice versa. A failure to break back through these levels is seen as confirmation of the initial break and in this case would be very bearish.

There’s no guarantee that we’ll see this though as there appears to be a lot of momentum behind this move. A sign that the current support could hold could come from the MACD and stochastic. If these display a divergence with price action, it suggests momentum has been lost.

Gold 4hr

Paired with a reversal on the charts – such as bullish engulfing pattern or morning star formation, or even something weaker if you prefer an earlier signal such as a hammer candle – this can be seen as bullish in the short term. This could even be on the 1-hour chart or even 30-minute, although the lower the time frame, the less reliable given that the bulk of the analysis for the move comes from 4-hour and daily charts.

The bounce we’ve seen already suggests this level is quite well supported.

Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.