Gold is on the rise again, and it is likely that its price action will test soon the previous highest levels, above $1,000. Currently Gold is trading just below this important level.
The price action has posted a high at $999, above the previous significant peak of last June (point E on the chart). This point E was posted on a resistance line that was the previous oblique support of the bullish move occurred between last October and last March. This ascending technical slope was built by higher lows where the price action was regularly bouncing back.
When this support was cleared in April, Gold prices continued their correction before rebounding (from points D to E). The previous support that became a new resistance prevented then a further rise above $1,000.
From this high posted in early June, Gold prices consolidated in a range between $900 and $975. The recent spike has started at the very beginning of the current month and it is likely that the barrier of $1,000 will be cleared soon.
One key indicator is the On Balance Volume (OBV). It shows that the money flowing into Gold futures contracts has been increasing regularly and significantly since the month of May. The volume creates the price action and this rising OBV is a strong indication that a bullish trend has developed.
There is also a medium-term technical support line (in green) that has been backing the price action for the last 5 months. This support line goes through higher low points D, F and G.
The Chande Momentum Oscillator has surged. It has entered an overbought area, which however is not confirmed yet by the Relative Strength Index (RSI).
The immediate target is of course the historical closing price of $1,004 posted in March 2008 (point A). It’s probable that the price action will remain a bit choppy around the key level $1,000 (illustrating the struggle between bulls and bears), but a move significantly higher this resistance level could create a new momentum.
Gold prices sharply corrected after the peak of point A as they were coming from far (below $800). The momentum was exhausting and profit-taking was unavoidable. Rather that today, the price action n has remained above $900 for a long time and the recent rally (from point G) is only a 7.5%-up move. Further upside is therefore possible and would attract new trend following flows.
