July 2013 Gold price action: retracing June losses
Following blow by blow of Gold price action so far
Since I write a fair bit on gold I thought I should do a posting to combine the pieces here and there. I guess this is necessary because the way I organise, I have some charts with short comments going just to Pinterest. And then because I belong to a particular Google+ community that is made of up individuals who are very passionate about gold, some comments go there too.
Calling Gold bullish on July 9
In this particular piece, I first called Gold price bullish. The clue that price action left me? Trading above its July Open Price.
A completely bullish reversal type of technical picture that can convince investors and traders to enter the long side must therefore look like this:
- To reverse the down trend of lower week-to-week highs price must make a Higher-Week-High followed by a Higher-Week-Low.
- Show us bullishness by trading above the Open.
In this chart of Gold, blue boxes show weekly prices while green lines show opening price of each month
Although we do not have the first condition, the second has presented itself.
Gold market sentiment got better by 16 July
In this piece, the takeaway was Gold market sentiment has a big improvement. But the big big thing in price action which we can see from the boxes: Week 28 of this chart has a bullish expansion.
22 July update
Bear in mind that gold took more than 1 year to print a distribution pattern i.e. fall below 1530 after reaching a high of 1920: a bottoming pattern might not take as long to build up but neither is it likely to reverse in a couple of weeks. A clearer indication is a retest of 1180 to see if it is a really firm support OR to see it recover June losses. From classical patterns, a retest of 1180 and good indication of support there will give us a nice W-shaped double bottom reversal.
Yesterday’s follow up 23 July
Potential resistance for gold extends as a zone all the way up to 1360 (April and May low). If the current low is a bullish reversal pattern, it certainly does not resemble classical chart patterns.
Wrapping up Gold price action with 3 observations
Gold has not printed any bullish reversal chart pattern that we can see from the line chart.
Since Gold took more than a year to distribute in this 1530-1920 range before breaking down in a big way, it is hard to see a bullish reversal pattern build up in less than 1 month. If it does, the explanation cannot be found inside technical analysis. We will probably have to look elsewhere such as demand and supply issues or other fundamentals.
Our approach of using month to month, week to week price action reveals: Gold definitely had a great 4-week rally but it does not change the fact that it is merely retracing or recouping its losses in June. We cannot overlook that despite the great gains in these 4 weeks, price is now between 61.8 – 76.4 percent price retracement only.
So why is Gold really up? My personal answer
The symphony of opinions in social media and blogosphere suggests many reasons from short covering to exploding demand in Asia and so on. Let me add my little 5 cents worth in this chart below.
See that red line there? What moving average is it? Price is likely to react to this line until it doesn’t.