Last week was pivotal for gold as far as the daily timeframe was concerned. For regular followers of my analysis, you will know the reason why, as it is the $1,840-per-ounce level that has been patiently waiting for a breach. In a week that saw gold move higher on five consecutive days, it was Wednesday’s price that finally broke this level, closing the session on a strong move higher with excellent volume.
The volatile price action on the day caused a degree of profit-taking, with the precious metal first surging to a high of $1,870.60 per ounce, before ending at $1,848.30. More importantly, it moved above the key resistance level of $1,840 per ounce which, of course, now becomes a solid platform of support in the move higher.
The resumption of the longer-term bullish sentiment was further confirmed on both Thursday and Friday as gold closed out the week at $1,868.50 per ounce – a cause for celebration for ardent gold bugs. More upside is expected as strongly rising inflation continues to focus the minds of the central banks.
The next question, of course, is where is gold heading in the longer term?
To answer this we need to turn our attention to a slower timeframe, namely the weekly chart. As we can see, last week’s candle ended as a solid up candle with no wicks to either top or bottom on good volume. This, thereby, confirmed the confidence of this move and highlights the next key level, which is now on the horizon at $1,925 per ounce, where the metal-topped out in June 2020. This is not a strong level, but one to be aware of as gold heads higher.
Of more significance is the accumulated volume on the VPOC histogram to the right of the chart, which presents a dense area of potential resistance from the current price at $1,866 per ounce, all the way through to the psychological $2,000-per-ounce area. Once here, resistance falls away dramatically. What this means in simple terms is that for the price to reach this iconic level, the volume associated with the upcoming price action of the next few weeks and months will have to be consistent and strong to provide the necessary momentum for gold to continue its bullish progress. And with inflation fears adding their own unique brand of support, I fully expect the trading year to end on a high point for gold bugs and gold alike.