Gold futures continue to trade in a very wide range, after mixed signals from the global economy sent the precious metals into minor tailspin. After testing the previous highs above $1,900 per ounce, the price of gold dropped sharply to trade below $1,800 per ounce once more. The market then found its footing as speculative buying set in to buy the dip and carried the price to Friday's close above $1,810.
Gold's short term weakness has been in sympathy with the broader commodities complex. Fears of another liquidity crisis similar to the one that rocked markets in 2008 have caused some nervous investors to exit the markets entirely, triggering a profit-taking selloff in the precious metals.
As has been the case in recent trade however, the decline has been met with quick recovery to previous levels. The result has been a series of higher lows in the longer term picture. The fact that gold's extraordinary volatility - trading in a range of as much as $100 per ounce in single sessions- has so far failed to break the overall uptrend is a bullish indication in itself.
The technical outlook suggests the market may confirm this trend in the week ahead. The most recent decline fits nicely inside of a Channel Down chart pattern, illustrated here on the 240-minute time interval to show the decline from the last swing high above $1,880 per ounce.
Friday's surge going into the close set the price at the top of the channel to place it in a good position for a breakout, which would confirm on renewed buying interest above $1,825 per ounce. Ideally this would occur on strong momentum without a retracement back inside the Channel Down chart pattern. A successful breakout would encourage the possibility of the brief move below $1,800 as a buying opportunity prior to an eventual move above the $1,920 level for another rally into record high territory.
Weakness in Monday's session would negate this breakout possibility in the near-term, and suggest a possible continuation of the sideways-to-lower range with a retest of the bottom of the channel near $1,750 per ounce.
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