Gold’s Record Rally Stalls at Fibonacci Extension Resistance
Gold posted a new record high on Monday at 2956 as a period of risk aversion supported by a series of weaker US economic data releases but led by a sell off in technology stocks, that started on Friday, continued to dominate the markets attention. However, roll forward another 48 hours and Gold prices have just traded at a 2 week low of 2880.
What’s interesting is that the positioning adjustment that started in US stock indices seems to have expanded into a wider bout of profit taking on winning trades that have outperformed since Donald Trump won the Presidential election in early November. Bitcoin dropped over 10%, the S&P 500 fell 4% and currently Gold has seen a pullback of 4.6% from Monday’s high.
Now, as traders look ahead to the release of the US PCE Index, the Federal Reserve’s preferred inflation gauge, at 1330 GMT tomorrow, all eyes are on what a deviation from expectations in this release, up or down, could mean for the direction of Gold moving forward into March.
Technical Update: Focus on the Fibonacci Extension
Since posting a low of 2583 on December 19th, Gold has enjoyed a strong phase of price strength, an advance that has consistently posted new all-time highs.
The latest upside extreme was seen on February 24th at 2956, which interestingly coincides with what appears to be a potentially important resistance at 2953. This level is equal to the 61.8% Fibonacci extension of the October 31st to November 14th last significant sell-off in price (Highlighted on price chart above).
Fibonacci extension levels use the same percentages as Fibonacci retracements, (e.g. 38.2% and 61.8%), but are calculated using a significant sell-off in price (e.g. Nov 14th Gold low 2537) and are projected higher from the upside extreme where the decline began (e.g. Oct 31st Gold high 2790). This can highlight potential resistance levels that traders can consider when an instrument like Gold is consistently posting record highs.
While there is no guarantee of an extended phase of weakness developing from a Fibonacci extension resistance level, having seen 2953 cap and turn the latest price activity lower, Gold may need to see upside closing breaks above 2953, if a more extended phase of strength is to emerge.
For now, at least the Fibonacci extension resistance at 2953 is holding and prompting fresh price weakness, and traders may be watching lower support levels, to gauge if a more extended decline may materialise.
In this recent uptrend, it has been the rising Bollinger mid-average, which currently stands at 2894 that has been able to hold previous price weakness, and if lower levels are set to be seen, it may well be closing breaks below this level that triggers them.
If this were to be the case, potential support levels may be represented by the 38.2%, 50% and 62.8% retracements of the December to February strength (2583 Dec 19th low to 2956 Feb 24th high), which stand at 2813, 2769 and 2726 respectively, although much will depend on future risk events and price trends.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
What’s interesting is that the positioning adjustment that started in US stock indices seems to have expanded into a wider bout of profit taking on winning trades that have outperformed since Donald Trump won the Presidential election in early November. Bitcoin dropped over 10%, the S&P 500 fell 4% and currently Gold has seen a pullback of 4.6% from Monday’s high.
Now, as traders look ahead to the release of the US PCE Index, the Federal Reserve’s preferred inflation gauge, at 1330 GMT tomorrow, all eyes are on what a deviation from expectations in this release, up or down, could mean for the direction of Gold moving forward into March.
Technical Update: Focus on the Fibonacci Extension
Since posting a low of 2583 on December 19th, Gold has enjoyed a strong phase of price strength, an advance that has consistently posted new all-time highs.
The latest upside extreme was seen on February 24th at 2956, which interestingly coincides with what appears to be a potentially important resistance at 2953. This level is equal to the 61.8% Fibonacci extension of the October 31st to November 14th last significant sell-off in price (Highlighted on price chart above).
Fibonacci extension levels use the same percentages as Fibonacci retracements, (e.g. 38.2% and 61.8%), but are calculated using a significant sell-off in price (e.g. Nov 14th Gold low 2537) and are projected higher from the upside extreme where the decline began (e.g. Oct 31st Gold high 2790). This can highlight potential resistance levels that traders can consider when an instrument like Gold is consistently posting record highs.
While there is no guarantee of an extended phase of weakness developing from a Fibonacci extension resistance level, having seen 2953 cap and turn the latest price activity lower, Gold may need to see upside closing breaks above 2953, if a more extended phase of strength is to emerge.
For now, at least the Fibonacci extension resistance at 2953 is holding and prompting fresh price weakness, and traders may be watching lower support levels, to gauge if a more extended decline may materialise.
In this recent uptrend, it has been the rising Bollinger mid-average, which currently stands at 2894 that has been able to hold previous price weakness, and if lower levels are set to be seen, it may well be closing breaks below this level that triggers them.
If this were to be the case, potential support levels may be represented by the 38.2%, 50% and 62.8% retracements of the December to February strength (2583 Dec 19th low to 2956 Feb 24th high), which stand at 2813, 2769 and 2726 respectively, although much will depend on future risk events and price trends.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
Global risk Warning CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading in CFDs. You should consider whether you understand how CFD
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Global risk Warning CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading in CFDs. You should consider whether you understand how CFD
Pernyataan Penyangkalan
Informasi dan publikasi tidak dimaksudkan untuk menjadi, dan bukan merupakan saran keuangan, investasi, perdagangan, atau rekomendasi lainnya yang diberikan atau didukung oleh TradingView. Baca selengkapnya di Persyaratan Penggunaan.