Gold Daily Chart.

Recently, I suggested that gold was looking fragile. If it should break to the downside, then $1,700 per ounce looked as though it might be threatened. That has, indeed, been the case. The collapse of the precious metal saw it hit an intraday low of $1,677.90 per ounce on Monday before recovering to close at $1,726.50. This calamitous price action followed the widespread down candle last Friday, which saw the metal breakaway on excellent volume from the VPOC – denoted with the yellow dashed line at $1,805 per ounce.

As we might expect after such a dramatic move, the volatility indicator on the NinjaTrader daily chart was triggered. As a result, we can now expect to see one of two things occur, either congestion within the range of this candle or a reversal higher.

Of more significance is the volume associated with this move when compared to volume over the last few months. What strikes us instantly is the fact that while this volume is high, it is not excessive. In fact, it is lower than the previous day, which is an anomaly. On such a violent move we should expect to see extreme volume, which clearly we do not have here. This confirms that one of the big operators is not participating and the signal for the sell-off is a trapping move. Moving forward, we can expect to see a period of consolidation within the range of the candle before gold recovers. It will more likely move back to retest the VPOC at $1,805 per ounce in due course.

Note, however, we do have strong price-based resistance at $1,750 per ounce, denoted with the red dashed line of the accumulation and distribution indicator . In addition, at this price level, volume on the VPOC histogram begins to build, which also acts as resistance. So as any recovery develops it will need to be associated with good volume. But remember, we are in the doldrums of summer, so this may be lighter than we would otherwise expect.

Where To Next For Price Of Gold?

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