Thursday's Market Minute: Gold At The Crossroads

Gold futures started 2021 with a bang, logging a 2.3% increase on the first trading day of the new year. But now the /GC contract has given back most of its gains, failing to surpass the highs from early November after yesterday’s drop on heavy volume. On one hand, the yellow metal looks like it could be breaking out of a downward trendline connecting the highs from Aug. 7 and Nov. 9 after pushing back above the 1900 level.

On the other hand, it saw a swift rejection near the previous highs. Technical analysis discourages arbitrarily giving significance to round-numbered price levels, but in this case there are many reasons 1900 could be a noteworthy area. This level most recently was a resistance point, and old resistance becomes new support. It also happens to be roughly the current level of the Parabolic SAR, which is often used by traders to determine changes in trend direction.

Additionally, the volume profile study shows a major node near this area, which indicates a price level of very heavy trading activity. Between 1900 and 1875, we also have the 21-day Exponential Moving Average, the 64-day EMA, and the 50-day Simple Moving Average, all of which could be candidates for traders looking to enter a long position. If /GC continues its climb, the yearly Linear Regression line at 1975 seems a likely point for a stall.

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