Gold futures backed off their new all-time high of $1,800 per ounce in late day trading on Wednesday, setting back into the middle of the large Channel Up chart pattern that has defined the latest rally. The Channel Up, illustrated here on the 30-minute candlestick chart, has established a clear support level at $1,764 per ounce. This rising trend line is likely to be retested after the quick drop from the resistance at $1,800 per ounce, with range-bound trading within the channel possible while the broader markets struggle to stabilize.
The volatility in gold remains at record levels, making the technical support and resistance points on the Channel Up chart pattern most useful for determining short term swings in the market. With precious metals reacting to ongoing turbulence in stocks, bonds, and currencies, the potential for a breakout from this channel also remains high. Breakout levels are currently around $1,805 per ounce to the upside, with a move to $1,760 needed to initiate a downside target. Given that gold has gained nearly $300 per ounce over the last month of trading, a profit-taking liquidation could lead to fast, heavy selling if this level is breached.
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