Gold – A breakout is coming

Can the recovery continue?

Gold has recovered strongly in recent weeks but it’s struggled for momentum since breaking above $1,800.

The yellow metal initially broke above here on Friday but failed to hold and gave back most of its gains to end the week below that important resistance level. This is a sign of weakness in the rally and suggested it may struggle when trading resumed this week.

While trading on Monday may have given the impression this was just a blip, as gold ended the day above $1,800, as we’ve seen today, those vulnerabilities remain as it once again plunged back below.

This leaves gold in a very strange position. It’s clearly still got plenty of support as it continues to push above the $1,800 handle but it’s having a hard time holding on and continues to be forced back. Something has to give.

At times today, it looked as though that may be a key support level around $1,780, which would have resulted in a bearish engulfing pattern on the daily chart and a break of the rising trendline formed during its recovery in recent weeks. But that support held and the price rebounded back.

Given such a tight range and one that’s becoming smaller by the day, one of these must soon fall, at which point we may have a much clearer view on the direction of travel for gold.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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