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Technical timeframe analysis: Gold steady near highs

May 24, 2021 14:34:26

We’ve seen headline grabbing volatility in both commodities and the universe over the last week while price action in currencies and the stock markets has stayed relatively muted.

One asset that is enjoying the current environment is gold which advanced for a third straight week. Helpful macro developments and the volatility especially has seen investors flipping into the precious metal as inflation concerns mount. Of course, rising prices always attract investor interest and the current bullish phase has seen holdings in gold exchange-traded funds (ETFs) increase for a fourth week.

Weekly chart: Holding at key levels

Stepping back and looking at the weekly chart, we can see that the descending price channel formed since the July peak was broken at the start of May with gold bugs pushing prices above the 50-month SMA. Last week’s price action then advanced through the sloping trendline from the $2075 top and the 50% retrace level of the July to April correction at $1875. Bullish momentum remains strong on this longer-term timeframe so if we can hold up here, then the target comes in at the next Fib level retracement at $1922. Support lies at the 50-week SMA around $1850.

4-Hour Chart: Topside breakout?

Switching to a much shorter timeframe, we can see the bullish momentum playing out on the four-hour chart. An ascending triangle pattern looks to be forming which is a continuation pattern, so often bullish in an uptrend. The base is a series of rising lows while the highs have formed at the top line. A solid break of the highs around $1887 should see prices push towards the $1900 mark.

Jamie DuttaAnalyst / Trader

"With extensive experience as a full time trader and financial market commentator, I have worked as a trader in top tier investment banks and trading houses, including Morgan Stanley and GAIN Capital trading Forex, Index derivatives. and Bonds. I combine technical analysis with a deep fundamental knowledge to identify trade set-ups. My real life experience allows me to break down the complexities of financial jargon and trading. This means everyone can better understand the compelling forces of greed and fear which are realised every day in countless ways across markets."

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