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Monthly Gold Chart Offers Some Insight On Yellow Metal's Future

By Anna CoullingCommoditiesJul 26, 2021 09:38AM ET
www.investing.com/analysis/monthly-gold-chart-offers-some-insight-on-yellow-metals-future-200593637
Monthly Gold Chart Offers Some Insight On Yellow Metal's Future
By Anna Coulling   |  Jul 26, 2021 09:38AM ET
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Gold Monthly Chart.
Gold Monthly Chart.

Attempting to forecast the future direction for gold is proving tricky at present from a daily perspective, so in order to offer a longer-term perspective, I have stepped down to the monthly chart to see if we can gain a better insight into the outlook for the precious metal.

Looking at the chart, the best description of the price action would be ‘wallowing in congestion!’

The long-legged Doji candle of August last year was the pre-cursor to the current indecision that has remained in place ever since, albeit with a bearish overtone with prices sliding lower.

Perhaps the most significant price action was in May and June 2021, where we had two up candles – the second of which was very strong. However, this was followed immediately by the subsequent month’s strong down candle. What this means, in effect, is if we overlay one on top of the other, the resultant candle is one with a small body and deep upper wick. In other words, it is a sign of weakness, which is further reinforced by the trend monitor indicator that is beginning to transition from bullish to the dark red of potential bearish sentiment.

Moreover, as can be seen, the price-based resistance denoted with the blue dashed line of the accumulation and distribution indicator at $1,920 per ounce also came into play, capping May’s advance in a price region where previous rallies had stalled last year. In addition, as the metal consolidates, the volume builds on the VPOC histogram, adding to the general malaise and a further layer to the labored progress higher.

Remember, volume on the VPOC histogram acts in the same way as price-based support and resistance. The heavier the weight of volume on an area, the greater will be the effort required to move through it.

So in summary, all we can say at present with any degree of certainty is that the bullish tone for gold of 2020 has not translated through into 2021. It seems we are set for further congestion as the metal struggles to move away from the $1,800/$1,900 per ounce region while developing an increasingly bearish tone. To the downside, volume on the VPOC histogram falls away as we approach $1,700 per ounce with a low volume node following. So any sustained move lower will require significantly less effort should the metal fall this far.

The bright spot on the horizon for gold is inflation, but even this seems to have dimmed over the past few months. Until it reappears with conviction, it will remain a glimmer of hope for gold bugs.

Monthly Gold Chart Offers Some Insight On Yellow Metal's Future
 

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Monthly Gold Chart Offers Some Insight On Yellow Metal's Future

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Comments (5)
Steve Siew
Steve Siew Jul 26, 2021 9:36PM ET
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Gold is good for both inflation and deflation
Midge Sturgis
Midge Sturgis Jul 26, 2021 8:36PM ET
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open account. New
michael engel
michael engel Jul 26, 2021 8:35PM ET
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GC weekly : take a line from June 13 2019 close to Mar 16 2020 close to Mar 1 2021 close and to June 14 2021 close. All  June/ July close > this line, that's a good sign.
michael engel
michael engel Jul 26, 2021 8:16PM ET
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Gold Futures monthly bu on 2011 fractal zone. June bar is slightly larger than May bar, (not an Engulf) on lower volume. July bar is 1/3 of June size, on 80% of the volume,with a selling tail.  weekly : June 28 spring is a failed spring. Today price close on Oct 1 2012 LPSY. That's positive.
Doug Wildman
Doug Wildman Jul 26, 2021 6:30PM ET
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What will be the effect of Congress playing Chicken with the debt ceiling?
 
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