Gold sold off steadily yesterday after failing to better Monday's high of 1417 overnight. The price dipped as low as 1389 before recovering slightly to close around 1400 and this morning is trading around this level.
Gold is forming a triangle pattern on the 4 hour chart, with a series of lower highs and higher lows. Triangles are consolidation patterns and usually resolve with a break in the direction of the prevailing trend. Less often, they are reversal patterns and see a break in the opposite direction, though either way, the break out of the triangle should provide a significant trending move.
The odds therefore favour a break to the downside as the prevailing trend is clearly down - the apex of the triangle will arrive on Friday, so we will get a resolution one way or another on or before Friday. Perhaps the release of the Non Farm Payrolls (NFP) number at 1.30pm UK time Friday will be the catalyst for the break, however in our opinion it is likely to occur before this.
There is a slew of data released today that could move the markets, including employment and productivity data, factory orders and the Fed's Beige Book.
The dollar has stabilised above 82.50, a move higher will see gold under pressure again, whilst oil has moved higher, giving gold a boost.
Equities sold off again yesterday, though appear to be attempting to form a base for the next rally leg. Any renewed strength in stocks will put pressure on gold, as the diversion of funds away from gold into the stock market has been a bearish factor for the yellow metal in 2013.
Today's video for subscribers looks at the triangle pattern in more detail and our a discussion of our strategy for the NFP data release on Friday.
Gold is forming a triangle pattern on the 4 hour chart, with a series of lower highs and higher lows. Triangles are consolidation patterns and usually resolve with a break in the direction of the prevailing trend. Less often, they are reversal patterns and see a break in the opposite direction, though either way, the break out of the triangle should provide a significant trending move.
The odds therefore favour a break to the downside as the prevailing trend is clearly down - the apex of the triangle will arrive on Friday, so we will get a resolution one way or another on or before Friday. Perhaps the release of the Non Farm Payrolls (NFP) number at 1.30pm UK time Friday will be the catalyst for the break, however in our opinion it is likely to occur before this.
There is a slew of data released today that could move the markets, including employment and productivity data, factory orders and the Fed's Beige Book.
The dollar has stabilised above 82.50, a move higher will see gold under pressure again, whilst oil has moved higher, giving gold a boost.
Equities sold off again yesterday, though appear to be attempting to form a base for the next rally leg. Any renewed strength in stocks will put pressure on gold, as the diversion of funds away from gold into the stock market has been a bearish factor for the yellow metal in 2013.
Today's video for subscribers looks at the triangle pattern in more detail and our a discussion of our strategy for the NFP data release on Friday.