Gold futures recovered from a steep sell-off last week to close in the middle of its range in what may be the most volatile week on record for the precious metal. Gold reached an all-time high near $1,685 per ounce at mid-week, and proceeded to plummet as the weakness in huge drop in stocks dragged down the entire commodities complex. The nearby Comex gold contract dropped all the way to $1,644 per ounce before recovering in Friday's session to close near $1,666.
This volatility is likely to have shaken many small traders out of positions, as trailing stops were hit on the way down and new short entries stopped out on the bounce higher. This is likely to leave the market to trade inside of Thursday and Friday's daily range, with sideways consolidation to begin the week ahead. Traders will be watching both the previous high of $1,668 as well as the reversal point of $1,644 for buying and selling retests and eventual breakouts to new levels.
The overall trend for gold remains very strongly bullish, and the sideways action may form a new base at the $1,650 level in much the same way it previously established a base at the $1,550 level, prior to the explosive move to the current price range.
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