Gold continues to hold its luster, closing the month of August up nearly 12%. Despite its drop-off from the August 22nd high of 1,912.10, the gold has rebounded and currently trading $123 an oz off of its recent August low. As the trend still points higher, buying on dips and looking for new highs remains attractive for gold bulls. Short sellers continue to remain sidelined looking for a drop under the daily support line at $1,750.00
Fundamentally, gold is still the safe haven of choice when it comes to global asset protection. While individual consumers are increasing demand for the yellow metal global central banks are also getting in on the buying. A recent IMF report cited Russia buying 4.4 tons of gold and Colombia purchasing another 2.3 tons. This increased demand factors into a continued favor for our current uptrend.
Price Action
Taking price in to a 4Hour chart we can see gold attempting to push higher over resistance at 1,835.00. This coincides with the .618 fib line found between the August 22nd high and the new low at 1,702.06 found on August 25th. Support is currently found on a rising trend line at 1,814.00. Price is currently wedging upward to support creating an opportunity for a possible breakout.
Trading Opportunity
My preference is to buy gold on a break of resistance. Entry orders should be placed over resistance at 1,850.00. Stops should risk $42 an oz at $1,808.00. Limits will look for new highs at $1934.00 for a 1:2 risk reward ratio.
Alternative scenarios include price testing support, prior to a break lower.
Walker England contributes to the Instructor Trading Tips articles. To receive more timely notifications on his reports, email instructor@dailyfx.com to be added to the distribution list.
