Originally published on April 24, 2019 by TraderStef at CrushTheStreet.
Let us start today’s technical analysis with a reminder that gold remains in the middle of a spring seasonality pattern that typically creates a choppy and lateral price trend. During April, the gold price can experience a short-lived rally, a pullback, and another upside rally toward the end of month. So far, seasonal patterns are holding true since Aug. 2018. The following chart plots out gold’s average seasonal pattern for the last 20 years. To view a larger version of any chart, right-click on it and choose your “view image” option.
Here is the gold spot weekly chart as of Apr. 24, overlaid with the Commitments of Traders (Cot) data as of Apr. 16. Note that the CoT data is always delayed by one week. The CFTC’s Apr. 23 CoT data covering the previous week’s price action will be released on Friday, Apr. 26.
The purpose of this overlay is to help identify near-term price trends based on positioning by the Commercials (bullion banks) and Large Specs (hedge funds). Almost without exception, the Commercial traders build short positions during a rising price trend and Large Specs add long positions to capture the momo play. When the gold price is approaching an inflection point, their positioning begins to flip. Zoom in to the bottom of the chart and note the Apr. 16 data marked with red dots. I included the 50 Exponential Moving Average (EMA) and Falling Wedge pattern on the weekly gold chart.
On several occasions since early March, a sudden fall in the gold price has mirrored a spike in the dollar during or after the COMEX open. That is what happens in a high-frequency (HFT), algorithmic, automated trading environment, with all factors in the overnight news cycle and financial markets considered: orders stack up in the pre-market queue before the 8:20am COMEX open. Sometimes the volatility occurs immediately at the COMEX open, sometimes a delay occurs due to an expected economic data release, or a few algorithms are waiting for a specific price pattern to develop before executing their orders.
The following two charts are an example of what occurred several times since March.
Gold vs. USD 1-minute chart Apr. 16, 2019…
Gold vs. USD 1-minute chart Apr. 23, 2019…
The following chart is an update from my live Twitter feed 48-hours after publishing the analyses in this article.
Gold vs. USD 1-minute chart Apr. 26, 2019 1pm EDT…
Gold weekly chart as of Apr. 23, 2019 at 8am EDT…
A bullish Ascending Triangle is the long-term pattern that dominates the chart. Following the $1,346.75 high on Feb. 20, the gold price stopped dead in its tracks at the overhead 500 Simple Moving Average (SMA) and encountered lateral resistance from the extended price chop that occurred in early 2018. Note that the weekly candlestick at the February high closed as a bearish Plunger Candle, which signaled that a pullback was in the cards.
A bearish Descending Triangle pattern developed following the February high where the 21 EMA provided support along the lower lateral of that triangle. That lateral was breached to the downside last week, and a bullish Falling Wedge is forming. If the price breaks down decisively through the 50 EMA, a revisit of the lower trendline drawn up (blue line) from the Aug. 2018 low is possible. Price support is currently at the convergence of all the EMAs around $1,270, and then there’s a lateral area where a confluence of two Fibonacci levels occurs around $1,250.
All of the moving averages are realigning back to a bullish lineup. The DMI-ADX remains in a positive stance but with negative momentum. The StochRSI has dropped into extremely oversold territory and is due for an upside pivot at some point during the spring seasonality pattern. Volumes are falling through the pullback, indicative of a weakening downtrend.
Gold vs. USD daily chart as of Apr. 24, 2019 at 5pm EDT…
I included blue vertical lines on the daily chart to highlight a few significant pivot points between the gold and USD price action. Gold held up extremely well this afternoon despite the USD rally, as the StochRSI is close to breaking out topside and telegraphing that the gold price is nearing an upside pivot.
I recommend a neutral near-term outlook until the topside trendline of the Falling Wedge and $1,300 are taken out with conviction. Spring is typically a bad time of the year to layer bullish positions due to seasonality patterns, but short-term speculative scalps and swings are possible in the volatility.
Here are a few articles to consider before closing up shop tonight:
Gold Standard Make a Comeback as Nations Lose Trust in Fiat? – Sputnik, Apr. 10
Germans Holding Record Amounts of Gold – GoldBroker, Apr. 16
Thousand ton twist: Gold buying frenzy by global central banks – RT, Apr. 16
Exclusive: 2008 Aftermath We Never Really Escaped – Jim Rickards, Apr. 18
European Gold ETPs reach record highs – World Gold Council, Apr. 17
The Case for Monetary Regime Change – WSJ Op-ed by Judy Shelton, Apr. 21
Gold will break out of slump and test 2018 highs Standard Chartered – CNBC, Apr. 21
World’s Central Banks Want More Gold in 2019 – GoldCore, Apr. 24
Dollar Soars To 2019 Highs As Bond Yields Tumble – Zerohedge, Apr. 24
A rare look inside West Point Mint’s massive gold vaults – Fox5 New York, Apr. 16
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