Originally published by AxiTrader
Back on March 7 I suggested gold could head to $1,389/90 and perhaps $1415 if the year's range top at $1366 gave way.
Of course, $1366 hasn't given way yet. Indeed it's proved once again just in the past week what a solid range top it is right now for gold. Gold, like many other assets right now, is stuck in a wide range - unable to break free.
But while we know gold is currently stuck in this $65 range right now as sentiment and fear ebb and flow about stocks and geopolitics taking a look at the longer term charts show just what an important juncture gold is sitting at right now.
Taking a longer-term view back to the 2011 highs in XAU/USD shows that the current $1366 resistance sits just below extremely important resistance at $1380 which was both a previous high zone and is the 38.2% retracement of the big fall from above $1900 an ounce to the low a year or two back where the low was around $1045.
Technically that simply reinforces the $1366-1380 region as an impressive zone of resistance for gold. It also means that should this resistance zone be bested - likely as a result of some sort of uptick in geopolitical tensions.
Now my base case for 2018, as I articulated in that March piece, is that uncertainty has materially increased and with that volatility.
So the chances of a break higher are increased. And on the basis of the longer term chart a break of the resistance highlighted would likely blow through the $1415 level highlighted previously to the 50% retracement of the big fall which comes in at $1483.
But the reality is the range is holding and has done so for some time.
So for the moment, XAU/USD is in a rough $1300/1366 range on the dailies with that $1380 level not far above. While below $1366 price is ratcheting through this $65/66 range. A test back toward $1320/24 looks a chance and if that breaks then it's back toward $1300/1310.
Which really means that we are in an environment best summarised with a classic trading axion - trade the range unless or until it breaks. But when it does the move could be sharp and hard.
Have a great day's trading.