Gold Respecting a Recent Trading Range but Support Needs to Hold Firm

Gold Respecting a Recent Trading Range but Support Needs to Hold Firm

A familiar range-bound pattern is emerging on the daily gold chart, potentially presenting traders with an opportunity for range trading over the upcoming weeks. However, for this trade setup to remain valid, the range support level must hold, necessitating a tight stop-loss for risk management.

Since the beginning of April this year, gold has been confined within a range of $2,278/oz to $2,450/oz. The support level was tested in late April and early May but held firm. Recently, a selloff brought the price within $10 of the support level before reversing higher. The break below the 20- and 50-day simple moving averages add a negative bias to the chart, while the Commodity Channel Index (CCI) indicator suggests the pair is nearing oversold conditions. For the range trade setup to continue, gold will need to break above the short- and medium-term moving averages – as it did in early May – to move back towards the resistance level.

Currently, gold trades around $2,311/oz. To protect against a potential further breakdown below the support level, a stop-loss order at $2,250/oz should be placed for any long trade.

Gold Daily Price Chart

Chart via TradingView

The IG Retail Client Sentiment report reveals that 61.66% of traders are currently holding net-long positions, resulting in a trader long-to-short ratio of 1.61 to 1. Compared to the previous day, the number of net-long traders has decreased by 8.60%. However, on a weekly basis, this figure has increased by 8.67%. Conversely, the number of net-short traders has risen by 2.78% from the previous trading session but declined by 8.25% compared to the previous week.

Our analysis typically takes a contrarian view toward crowd sentiment. The current net-long positioning of traders suggests that gold prices may continue to fall. However, the recent changes in positioning, with fewer net-long traders than yesterday but more than last week, present a mixed trading bias for the precious metal.

What is your view on Gold – bullish or bearish?? You can let us know via the form at the end of this piece or contact the author via Twitter @nickcawley1.