- Gold attempted to recover from a gap lower but quickly reversed at $4,200, producing a weak candlestick.
- Easing trade concerns and fading volume on recent rallies raise questions about momentum and the durability of gold’s uptrend.
Gold initially tried to recover from a small gap lower to kick off the Friday session, but then turned around to show signs of exhaustion at the $4,200 level. The market really fell significantly during the day. It has bounced a little bit, but this is a very rough-looking candlestick. One of the things that could come into play is that there were concerns about the global trade situation, and that's part of what has been pushing gold higher.
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During the trading session here on Friday, the United States and Switzerland have come to an agreement. So that's another bit of good news, and that could also weigh upon gold. I don't necessarily think that U.S.-Swiss trade relations are a hot global topic. I don't really know that there's a lot of trade between the two countries, but they are two major economies. And that in and of itself is good news.
The Chart
What I find very interesting on the gold chart is that we spiked and then sold off viciously a couple of weeks ago. But on this return rally to try to take the market to fresh new highs, we haven't had anywhere near the volume. And that is a bit of divergence when it comes to volume. So, it's a classic topping signal. That doesn't mean that you should be short of gold quite yet. But I do think gold isn't the one-way bet it once was.
So, the question becomes, are you going to see the market go sideways and consolidate in order to be comfortable up here? Or are we going to blow through significant support near the 50-day EMA? If we were to break down below the 50-day EMA, we could very well see this market fall apart.
If we break above the top of the candlestick from Thursday, that opens up the possibility of a move to the $4,400 level, but that seems to be swimming upstream at the moment.
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