Talking Points
- Gold prices touch resistance at 1,263.87
- Bullish breakouts expose 2016 highs at 1,303.62
- Sentiment readings flip, with SSI set at -1.10
Gold Prices are set to close lower today after failing to breakout higher above a critical point of resistance. As you can see in the graph below, resistance currently stands at 1,263.87. This point has been identified by measuring a 61.8% retracement between the May 2016 high 1,303.62 and the May 2016 Low at 1,199.55. If prices fail to break above resistance, it opens up the possibility that Gold prices may again decline back towards 1,199.55. This decline in price would have series implications, as it would suggest a return to Golds multiyear downtrend.
Looking for additional trade ideas for Gold? Check out our Gold Trading Guide
Gold Daily Chart
(Created using Marketscope 2.0 Charts)
Alternatively if prices breakout above this 61.8% retracement, it opens Gold prices to testing other key values of resistance. This includes the psychological 1,300 handle and the previously mentioned May high at 1,303.62. These points are critical for Gold bulls as they are still technically considered a lower high when compared the January 2015 high found at 1,307.49. For any long term rallies to continue, prices must convincingly breakout and trade above this value.
Why and how do we use SSI in trading? View our video and download the free indicator here
SSI (speculative sentiment index) for Gold (Ticker XAU/USD) stands at -1.10 with 52% of positioning long. It is worth noting that SSI has flipped negative from last weeks and yesterday’s trading. When positioning flips from net long to net short, it may be an indication of a changing trend. If Gold prices continue to rise, traders should look for SSI to move towards a negative extreme of -2.0 or more. Alternatively, if prices pause at resistance and turn lower, traders should watch for SSI to flip back towards a positive value.
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