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Gold Prices Hold Bearish Channel as Bulls Shy Away from Big-Picture Resistance

Gold Prices Hold Bearish Channel as Bulls Shy Away from Big-Picture Resistance

2018-04-04 18:20:00
James Stanley, Strategist
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Talking Points:

- Gold prices have posed another instance of resistance off of the bearish channel that’s developed off of this year’s highs.

- That 2018 bearish channel has built-in around both 2016 and 2017 highs, and this helps to highlight a big area of resistance that would likely need to be resolved before longer-term stances can shift the bullish approach into a higher gear. Conversely, a break below the 2018 low around $1,303 opens the door for a short-term bearish push in Gold prices.

- Are you looking to improve your trading approach? Check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently positioned around Gold? Click here for IG Client Sentiment.

Gold’s Bearish Channel Strikes Again

Gold prices saw a strong bump in late-March to test what’s become an imposing area of resistance. That area of resistance, taken from the highs in both 2016 and 2017, has continued to deter bulls after multiple failed tests already in 2018. This area came into play in January, and then again in February with a lower-high showing on that second failed attempt. And then in March, prices turned around just shy of this zone with a reversal showing off of the bearish trend-line taken from the prior 2018 highs.

Gold Prices Continue to Resist Around 2016/2017 Highs

gold prices daily chart

Chart prepared by James Stanley

The bearish channel that we’ve been following off of the 2018 highs helped to turn-around prices in late-March, and price action posed a quick run to the mid-line of the channel, with support showing around the $1,320 area on the chart. The continued lower-highs, combined with the failure to even test the $1,357.50 level (the 2017 high) urges caution for topside approaches.

Gold Price Four-Hour Chart: Bearish Channel Continues to Define post-January Price Action

gold prices four hour chart

Chart prepared by James Stanley

The Bigger Picture Behind Gold Prices

Longer-term, we have a few different items of interest to work with. This bearish channel is taking place within a longer-term bullish channel that developed off of the December, 2016 lows. That bullish channel has started to run into resistance as taken from 2016 and 2017 highs, shown in the red box on the below chart; and this helps to put into scope near-term dynamics in relation to longer-term trends in Gold prices.

Gold Prices Weekly Chart: Bearish Channel Exists Within Longer-Term Bullish Channel

gold prices weekly chart

Chart prepared by James Stanley

Moving Forward

For longer-term stances, traders will likely want to see some element of resolution around this longer-term zone of resistance before making a concerted push in either direction. The top of this zone of resistance is at the 2016 high of $1,375.15, and a break above opens the door to a further topside run, targeting areas such as $1,400 or the July, 2013 high of $1,433. On the bearish side – a break below the 2018 low of $1,302.97 indicates that this longer-term area of resistance is holding, and near-term price action may be making a deeper run-lower within the longer-term bullish channel. This would open the door for down-side targets around $1,280 before support comes into play.

To read more:

Are you looking for longer-term analysis on Gold prices? Our DailyFX Forecasts for Q1 have a section specifically for Gold. We also offer a plethora of resources on our Gold page, and traders can stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

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

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