This week’s rally in gold, spurred by the combined effects of a weaker US dollar and tensions in Yemen which saw the precious metal touch a high yesterday of $1219.50 now appears to be running out of steam. Yesterday’s price action for gold sent a strong signal to this effect with the metal attempting to breach the strong ceiling of resistance in the $1218 per ounce region before closing the session well off the highs, and ending with a deep upper wick to the body of the candle. This in itself suggests weakness which is further confirmed by yesterday’s volumes which were high, and further reinforcing that selling was in evidence.
Overnight gold has traded lower on Globex and at time of writing is currently moving through the $1200 per ounce level and poised at $1197.40. With the US dollar now regaining some momentum to the upside, and with a modicum of risk returning to the markets, the outlook for gold continues to remain bearish. Indeed the price action of the last two weeks is simply reflective of a limited bounce higher and not a signal of any major reversal.