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Gold Prices Hold Channel as Bears Push Towards 2018 Lows

Gold Prices Hold Channel as Bears Push Towards 2018 Lows

2018-04-23 16:34:00
James Stanley, Currency Strategist
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Talking Points:

- The US Dollar is catching a bid and this is helping to drive Gold prices-lower, continuing the reversal seen this month after a test of long-term resistance.

- Gold prices have been caught in an erratic range for much of the past three months, and this comes at a key juncture of long-term resistance on the chart. The 2017 bullish channel in Gold prices continues to hold, but a run of USD-strength is exposing the support side of near-term price action, making the prospect of bullish strategies less attractive.

- 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 Prices Continue April Reversal

On a short-term basis, Gold has been filled with frenetic activity over the past month, and that statement can pretty much be applied to the entirety of 2018. A spate of strength started in mid-December and ran through January, but as soon as Gold prices began to test a key zone of resistance, that strength went on hiatus and prices have been bouncing back-and-forth rather aggressively ever since. There have been a litany of themes and a plethora of reasons, but the takeaway is one in the same: Gold prices have been range-bound now for over three months.

Gold Goes Range: Four-Hour Chart, Range-Bound for Past Three Months

gold prices four-hour chart

Chart prepared by James Stanley

On a longer-term basis, we can see where this range-bound activity over the past three months can be taken with a bearish bias. There was a bearish channel that formed off of the lower-lows and lower-highs that showed in February, and that channel has largely remained. In late-March/early-April, we saw the mid-line of this channel at work, as this helped to mark the April lows, around the $1,320 level on the chart.

Go

ld Eight-Hour Chart: Bearish Channel Remains

gold prices eight hour chart

Chart prepared by James Stanley

Going out a little longer, and we can see where the above bearish channel is part of a different channel, this being a bullish channel that’s been active in Gold since the beginning of last year. This bullish channel guided prices-higher for most of 2017 and into 2018, and this helps to form the ‘big’ zone of resistance that’s continued to thwart Gold bulls. This zone of resistance is taken from the 2016 high of $1,375.15 down to the 2017 high of $1,357.50. We’ve now seen four failed attempts at this zone already in 2018, highlighting how rigid this area is as resistance on the chart.

Gold Prices Weekly Chart: Big Picture Resistance Zone Continues to Hold the Highs

gold prices weekly chart

Chart prepared by James Stanley

Moving Forward

Given that we’re working with a longer-term area of resistance, the potential topside on bullish positions will likely remain capped until we get some form of resolution. This would mean that shorter-term plays could be based around near-term support levels, and if we do see buyers hold support above the April swing of $1,319.20, the door could open for bullish reversals back towards resistance around $1,344 up to $1,350.

On the other hand, if support cannot hold up above $1,319, the door is opened for a re-test of 2018 lows in the area that runs from $1,302-$1,308; and if that cannot hold, the area around $1,286 becomes attractive for the next stop of support.

Gold Prices Eye 2018 Lows

gold prices four hour chart

Chart prepared by James Stanley

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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Contact and follow James on Twitter: @JStanleyFX

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