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Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.
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Gold has been trending lower for the better part of 2018. Apart from the first four months of the year, sellers have had control without much argument from buyers.
The closest gold bulls have come to reversing the trend came on August 16 when the market reached a year-to-date low of 1160. However, the relief rally sputtered out at the end of August, and the market has been moving sideways ever since.
Yesterday’s selloff attempted to reestablish the 2018 downtrend, but buyers have stepped in so far today. In fact, they’ve erased most of yesterday’s losses.
That said, gold is currently retesting several September lows as new resistance. The 1193 area attracted buyers between the 4th and 26th of this month. It should, therefore, serve as new resistance moving forward.
As I type this, gold is retesting those lows near 1193. But so far, the price action isn’t giving any indication that it’s time to sell. That’s especially relevant given that it’s Friday as well as the last trading day of the month, so we’d expect to see some erratic behavior today.
To continue playing devil’s advocate, the downtrend that began in April is getting stretched. Not so much on the daily or weekly time frames, but the 10 and 20 EMAs on the monthly chart are up near 1250.
Translation: There may not be much downside left, but if there is, it’s likely to materialize near 1193 resistance.
One way to combat negative factors like the ones I just mentioned is to stay patient and wait for a price action signal. Perhaps the market will show its hand next week with a bearish pin bar near 1193.
Alternatively, if gold begins to close back above those September lows at 1193, it’s probably best to stand aside. Such a move would expose the next resistance area at 1208.
For now though, the 1193 area is resistance. Bearish price action from this area next week could take the market back to the year-to-date low at 1160. We could also see some support build near 1182.
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