Gold sold off after failing to break through the 1625-1630 resistance area yesterday, though found support at a higher level than the previous sell offs and remains in a pattern of higher lows.

We are just waiting for the spark that will lift gold through the 1625-1630 resistance area and kickstart the Wave 5 upleg, though we will probably have to wait until September to get it.

Today's video looks at the last few days price action in more detail.

Gold continued to drift higher on Friday and this morning, it is interesting to note that any price dips are being quickly bought back up and there is a pattern of higher lows on the daily charts.

The slow quiet rangebound trading could continue for another couple of weeks, though large moves can often take people by surprise and arise out of seemnigly sleepy conditions so we remain on alert for any developments.

Our strategy is clear and has been outlined a number of times to our subscribers in our daily video updates.

This week gold has traded within an extremely tight range of around $20.  There has been a narrow range of $150 for past 3 months, from $1525 to $1675, as central banks have failed to provide firm commitment to fresh stimulus packages – this winds down to a tighter range between major economic releases.   

As we are now in the summer doldrums with half of the world taking their holidays or watching the Olympics, the narrow range wasn’t much of a surprise – the gold futures trading volume 30-day average is around 169,000 lots…this week some trading days have seen less than half of that average.

As always, the week following the major central bank announcements tends to be a quieter week on the news front.

The Aussies left their rates unchanged, which was expected and so had little impact on the market. There was weak data across Europe which helped push gold prices slightly higher as it strengthens the case for intervention – Italian GDP contracted in Q2, Greek unemployment rose to record highs (unsurprisingly) and German manufacturing forecasts were reduced.  Both the ECB and Bank of England pegged back growth predictions from previous forecasts.

The lack of action from the ECB to help tackle the regions debt crisis continues to dampen markets, including gold.  Clear statements of intent and action are required out of the Eurozone to help underpin confidence across all markets. 

The Commitment of Traders report for the week ended 31st July showed a significant rise in net-long positions in the “big dogs” managed money accounts.  This is an indication that the fund traders see more potential to the upside right now.

In the midst of this gold has crept higher throughout the week – although as I’m writing this on Friday morning there has been a decline overnight from Thursday’s high off the back of downbeat economic news in China.

The price has held strong above $1600 all week.  The longer it does this, the better the bullish case looks.  Many analysts are speculating that the Fed will announce that QE3 will commence at some point in September, but the US Elections in November cast some doubts on that.

Since the end of July these have taken on a stronger, more consistent shape where the market looks like it’s gathering some momentum for a breakout above the $1625-$1630 level – although as we said before the trading volumes this week are low and there has been a dearth of news, so it’s still a case of watching and waiting.  We want to see that level taken out convincingly before piling in.

A strong break above $1630 would see next resistance at $1660ish and again around $1690 – beyond $1700 there really isn’t much resistance all the way back up to $1800.

On the downside, there has been strong support at $1605-$1610 this week and below that we’ve got the round number of $1600.  Should that give way, there is support around $1580 and again at $1560.

Should we fall through that level we’d expect to test the $1525 level again where there is extremely strong support.  As we’ve been saying for months now, if that gives way we’ll be diving in short with everything we’ve got.

Gold continued to drift higher yesterday, hitting resistance again around 1618 before selling off slightly this morning. Gold is currently trading around 1610.

The pattern of higher lows continues and, although there is no conviction behind the rally yet, we have certainly moved to a "buy the dips" mentality from one of  "sell the rallies", which we believe is significant for the future direction of the market.

The longer that gold remains above 1600, the higher the chance of a resolution to the upside of the corrective triangle, 1630 is the key level to watch for an upside breakout.

After selling off in the morning yesterday, gold found support around 1603 and rallied back up to 1617 and has continued to drift higher this morning.

Although the trading volumes are very light, the pattern of higher lows is bullish and it looks as though the market is heading for a retest of 1630.

If this level can be overcome, a decent rally should be forthcoming, with resistance at the 200 DMA and the upper boundary of the large Wave 4 triangle above this.

Today's video looks at the position of the gold market in more detail and our trading strategy.

Gold drifted higher yesterday, finding resistance at 1619 before falling back and finding support around 1610.   There was no real conviction behind the move and gold has drifted back below 1610 this morning.

The position has not changed from yesterday, the action is typical of the "summer doldrums" and we await clarification of the next trending move.

Today's video looks at yesterday's price action in a bit more detail and discusses our strategy for our next trade.

Gold rose yesterday, along with equities and other commodities, as the dollar continued to decline.  The pattern of higher lows is encouraging for the bulls, gold is now back above all but the 200 DMAs and appears to be heading higher.

However, the month of August is usually very quiet from a trading perspective and we may have to wait until September before we see a major move begin.

Today's video looks at our strategy for our next trade and where we believe the market is heading next.

Friday saw a wild ride in gold as the market initially sold off on a stronger than expected jobs number in the US (stronger jobs meaning less likelihood of economic stimulus), before recovering and rallying back above 1600 with equities and commodities later in the day.

The slew of data at the end of the week and policy decisions by central banks are still being digested by markets, resulting in whipsawing and seemingly random price swings.  A clear direction will emerge shortly, unitl then we remain on the sidelines.

Today's video looks at Friday's price action in more detail and our strategy for our next trade.

We warned our subscribers that there was a significant risk of disappointment if the ECB failed to come up with a radical action plan for solving the Eurozone crisis and that is exactly what happened.

Gold sold off after the ECB announcements, eventually finding support at 1583.  We are now well back into the corrective triangle and the market can be described as neutral with a bearish tilt.

There is a likelihood that the market will continue to sell off down to the 1525-1550 support zone, however we are right in the middle of the range and the best place to be is on the sidelines for now.

The gold market took a distinctively bearish view of the news this week from both the Fed and ECB.  After last week’s gains off of the back of Draghi’s comments to support the Euro at whatever cost, the gold price this morning stands at $1590 which is nearly $40 short of its high at the end of last week.

The market had priced in an expectancy of some firm direction with regards the timings of the next round of stimulus, but both Bernanke and Draghi stopped short of that.

The indicators for some forms of stimulus packages being inevitable definitely increased, which is why the support around $1580 - $1590 held after a test on Thursday afternoon following the ECB press conference.

In the FOMC minutes, the language subtly shifted with the phrase "will provide additional accommodation as needed" being used, as opposed to "is prepared to take further action", which is what was said in June.  As it happens, and probably not by chance, the wording of the July phrase is very similar to the wording of the September 2010 FOMC statement before announcing QE2 in early November.

Many analysts think that the announcement will be made at the Fed’s meeting in Jackson Hole, Wyoming, on the 31st August; however there is a view that this may be yet another damp squib as the Fed has a habit of not announcing anything which will rock the markets in the run up to elections – so with the US Presidential Elections happening in November we could see a holding pattern develop unless there is a really major economic set-back before then.

Draghi’s comments had the most impact, although they didn’t really amount to much.  The expectancy was high, after Draghi told an investment conference before the Olympics that "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” But all that statement really did was to paint him into a corner where the markets had rose in expectancy only to be disappointed with another round of rhetoric from ECB directed at the seemingly leaderless EU.

The initial plan is for the Eurozone governments to utilise existing rescue funds before the ECB will intervene further.  There were some strong words said about the Euro being irreversible and it being pointless to go short on the Euro, but very little by the way of concrete action plans and a sign that the Eurozone has got it together yet.  It still represents the major risk to the global economy.

The next big news is lunchtime today with the US non-farm payroll data being released.  If this shows a decline in jobs then expect rises in the gold market and possibly a statement or indication from the Fed that stimulus is likely to be sooner rather than later.  If jobs news is strong, expect the reverse.

On the technical side of things, we’re really in a “no-change” position from the position we've been stating for the last few weeks.  There have been trading opportunities, but the next big moves will be dependent on breaking out either above the $1630 level or below $1525 – obviously there will be short-term opportunities within that range whilst the market makes up its mind on the medium-term direction. 

The $1525 low that has been tested three times since the record high in Sept’11 happens to be the 23.6% retracement of the major bull market move from Sept ’99 to Sept 2011 – this level has been a rock solid support point, but if it is broken there is nothing beneath it other than round numbers all the way back to $1280ish.  Of course there will be rises and falls along the way, and a new round of QE will likely arrest any major decline – but if the support at $1525 gives way then we are betting the house on a big move south.

Similarly, a convincing breakout above the $1630 - $1640 resistance would indicate to us that the next big bull wave is forming and once $1680 is cleared, there is little resistance all the way back up to $1800.  If this move is off the back of an announcement, followed closely by implementation of QE3, then expect gold to surpass its previous record high in a move well beyond the $1900 level.

In amongst all of this, our traders continue to identify opportunities and to advise our subscribers accordingly.