Gold Looking Overbought Around $1300

Previous Price Action

It is a long time since I talked about gold, but in my last post back in October, I highlighted the upwards price breakout that had just occurred on this particular commodity, and this proved to be a decisive breakout.

I remember saying at the time that I wasn’t really convinced about this specific breakout, but I turned out to be wrong because the price did indeed continue to creep higher in the following months.

This is primarily because people turn to safe havens in times of crisis, and November and December saw some of the biggest stock market falls on record.

As a result, the price of gold currently stands at $1283 at the time of writing, having previously traded close to $1200 for long periods of time.

Future Price Move

The stock markets have actually bounced back in recent weeks, and as a result of this, people have been selling gold to buy stocks, pushing the price down slightly.

After trading close to the $1300 level, which is an important round number, and therefore a key resistance level that needs to be broken, it has since fallen back to $1283, as mentioned above.

However I still think there is a possible trading opportunity here.

Trading Opportunity

It is still too early to predict where the stock markets are headed because a continuation of the downward trend could be just around the corner, but I still believe that the price of gold will struggle to break through the significant $1300 level.

Therefore it might be worth looking for a clear reversal signal on the daily chart of this particular market for additional confirmation.

If you look at the price chart above, you can see that we have just had a downward MACD crossover, which is often seen as quite a strong reversal signalby itself, but I personally would be looking to enter a short closer to $1300 if possible.

Ideally I would like to see a pin bar on the daily chart because if the price pushed up towards $1300 once again, but ran out of momentum a second time before breaking lower, this would be the perfect time to go short.

So at the moment we just have to wait and see if this particular scenario plays out, but as always, I want to point out that these are just my own thoughts and opinions. This doesn’t represent professional financial or trading advice in any way.