The question that users of financial spread betting are asking at the moment is where next for Gold?
Last week, August Gold managed a small gain for the week of 0.22% but there were signs that the market was getting tired and was possibly forming a lower high at the resistance area around $1220. As we had written in this week’s weekly update the long term trend remains up and will continue to be so as long as support around $1170 holds.
However, the possible lower high and the failure to clear resistance had been asserting a downward pressure on Gold until yesterday. Gold gapped higher at the open (a bullish sign), reaching an intra day high of $1246.7 before falling back slightly to close at $1240.8. The high of the day was just shy of the all time highs posted in this contract on the 14th May at $1251.4. We have had some reversal patterns near the all time highs, especially on the weekly chart, which appeared to be confirming resistance, which would be expected at all time highs.
Moving forward, if we can get a close above $1251.4 that will negate the reversal patterns and possibly lead to the next wave of buying pressure, which could push the market higher once again. Failure though to close above this level may lead to another sell off, back towards the first support area around $1200.
The fact that Gold has continued to rise in spite of US dollar strength is a bullish sign for Gold as normally these 2 markets have a negative correlation. Aside from technical aspects there are bullish and bearish factors that are likely to affect Gold in the medium term so the best approach is not to try to guess future market direction but to follow the trend and let the market tell you where it wants to go.
At LS Trader we remain long on Gold as both the short and long term trends remain up. We have been long Gold since we entered the market in the June contract on the 26th April at $1153, so this is already a nice profitable trade for us. One of the best and easiest ways to trade gold is through financial spread betting as spread bets on gold can be placed from as little as £1 per point, and all profits are tax free.