Gold Technical Analysis
Gold has fallen to a fresh eight-week low today as the market digests speculation that the Fed will not be providing additional stimulus in the near term as the U.S. economy recovers. We are now coming to the end of Thursday and gold has seen a range covering 99% of the AWR (average weekly range) over 26 weeks with a high/low of $1714 and $1634 respectively.
- Price is now moving strongly to the downside and the bearish engulfing price action reversal candle from the 26/2/2011 has proved to be an excellent early indicator with regards to the change in near term trend. Many analysts called for higher gold prices on the 2nd March and bullish gold analysts outnumbered bears on March 9th according to Bloomberg. Simple price action analysis proved to give a better insight into the overriding market sentiment.
- Gold has this week once again showed respect for a highly technical area as it reversed at the FE61.8% expansion of the first wave lower. Price has now given another inside day; our preference is however to see these candles at big round numbers or breakout areas.
- A break to the downside would initially see the 61.8% retrace level come into play but this would be very close to the break of the inside day low if this scenario was to happen.
- Any move back to the upside would see the $1700 level come back into focus and this price pivot level has proved to be a strong area over recent trading.