Can the recovery continue?
Gold has recovered strongly in recent weeks but it’s struggled for momentum since breaking above $1,800.
The yellow metal initially broke above here on Friday but failed to hold and gave back most of its gains to end the week below that important resistance level. This is a sign of weakness in the rally and suggested it may struggle when trading resumed this week.
While trading on Monday may have given the impression this was just a blip, as gold ended the day above $1,800, but as we’ve seen since, those vulnerabilities remain as it once again plunged back below that level.
This leaves gold in a very strange position. It’s clearly still got plenty of support as it continues to try to push above the $1,800 handle but it’s having a hard time holding on and continues to be forced back. Something has to give.
At times yesterday, it looked as though there may be a key support level around $1,780, which would have resulted in a bearish engulfing pattern on the daily chart and a break of the rising trendline formed during its recovery in recent weeks. But that support held and the price rebounded back. Now once again it's back below the $1,800 level.
Given such a tight range and one that’s becoming smaller by the day, one of these must soon fall, at which point we may have a much clearer view on the direction of travel for gold.