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Gold Prices Pose a Bullish Run, but Set a Lower-High

Gold Prices Pose a Bullish Run, but Set a Lower-High

2016-09-07 18:38:00
James Stanley, Currency Strategist
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Talking Points:

  • Gold Technical Strategy: Longer-term up-trend another bump higher after Friday’s NFP, Tuesday’s ISM.
  • As U.S. rate hike bets shuttered lower after disappointing data, Gold prices caught an aggressive bid-higher.
  • If you’re looking for trading ideas, check out our Trading Guides. And if you want something more short-term in nature, check out our SSI indicator.

In our last article, we looked at Gold prices trending lower after the chorus of Fed speakers had helped to prod U.S. rate expectations higher around the Jackson Hole Economic Symposium. So while the bullish structure and outlook were still very much alive for Gold, the risk of a deeper retracement made the prospect of bullish positions rather daunting; especially given the concerted effort from various members of the Fed to help ramp those rate-hike expectations higher.

But as we saw on June 3rd and again on July 29th, those expectations for hakwish moves from the Federal Reserve can quickly be offset by disappointing U.S. data that could, potentially, mean that markets are waiting even longer for that next rate hike from the Fed. This is generally negative for the US dollar as rate-hike bets go out of the window; and, in-turn, a positive for Gold.

This has been somewhat of the context of Gold prices this year: The bullish top-side moves have been fast and violent as U.S. rate hike expectations go out-of-the-window; followed by grind that could last for months as markets await more information on what may elicit that next move from the Fed. This can be a dangerous type of environment to trade in and, in-turn, traders should adapt by becoming more prudent and even more aggressive with risk management.

The complication with current price action is the fact that prices are sitting so near prior levels of resistance that have also happened to come-in at lower-highs. The July high was set at $1,375.04, and in early August, Gold prices tried to break above but faced four days of selling that capped the top-side run. Another attempt to eclipse that batch of resistance later in the month fell flat. This most recent top-side run has seen sellers come-in eveen ahead of those lows, so while the past four days have been extremely bullish in Gold, this batch of resistance for the next $30 above price action could make bullish continuation a distant propsect with current structure.

To confirm the prospect of continued bullishness, traders would want to see price action finally able to eclipse these prior highs starting with the swing-high at $1,357, followed by the August highs at around $1,367.

Gold Prices Pose a Bullish Run, but Set a Lower-High

Created with Marketscope/Trading Station II; prepared by James Stanley

--- Written by James Stanley, Analyst for DailyFX.com

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