It is not often that I share monthly charts as the one of gold futures below but recent price action calls for analysis of longer term view.
Drop in metals, energies and other commodities over the last few months brought gold to a recent low of 1182.80. Strength of US dollar along general weakness in the commodity sectors were the main contributors to the recent sell off.
I mentioned before that I believe fundamentals take over technical charts anytime we look at longer term time frames such as monthly/ yearly etc. yet it still helps to look at the charts and try to find clues from previous price action.
Looking at Heikin-Ashi monthly chart below, you will notice the amazing run gold had since it's first major correction in 2009 when it resumed the bull run and went all the way up to flirt with the $2000 mark. Since then this market corrected pretty fast and tested the 1180 level 3 times, June 2013, Dec 2013 and just recently Oct 2014. The band between 1154 ( 61.8% retracment level) and 1183 is crucial.
Gold Monthly Chart
GCE Gold (Globex) Monthly Continuation Heikin Ashi
This third test will provide answers in my opinion. If the market is able to break below 1180 and close a trading session below that, i think the door will open for a larger correction. On the flip side failure to break below will help create short covering, where short positions cover by buying and start fueling a rally.
Breaking down the longer time frame into shorter time frames ( in this case I am looking at weekly chart below) we see that market is extremely oversold with a potential to bounce towards the 1240 level initially.
Gold Weekly Chart
GCE Gold (Globex) Weekly Continuation
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About Ilan Levy-Mayer
Ilan Levy-Mayer has been a commodities broker for over 15 years, and holds an MBA in Finance and Marketing from Hebrew University in Jerusalem. Ilan is currently the Vice President and a Senior Broker at Cannon Trading Company.
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