Gold remains in the narrow zone that has confined the precious metal for the month. The low to high trading range has only been $41.55 this month which is the most narrow since around the same range in August of 2009. Is it time to look for a break out and extension of the months range with 1/2 the month gone? Why not?

What do we know?

Low $1584.60 on August 2nd
High $1626.15 on August 10th
100 day MA is in between at $1608.06 currently.

Yesterday the price moved below the 100 day MA and closed below the MA for the 1st time since August 6th (bearish). Today, the price could not extend lower and the price has rebounded back toward the low from last Friday and the 100 day MA at the $1605.27 and $1608.06 levels. Traders, unsure of the bias, can use these levels to define risk.

THE BEARISH TRADE: If you are more bearish, sell against the levels with stop on a move back above the 100 day MA in the $1608 area. Should today just be a breather, and the 100 day MA is not breached (give up to $1609/11 to be safe), the price targets are:

  • $1584 (low for August),
  • $1572 where the bottom trend line is found,
  • $1554 (July low) ,
  • $1548 (June low) and
  • $1526 (low for 2012).

THE BULLISH TRADE: For traders who are bullish, a move above the 100 day MA at $1608.06 should tilt the bias – and momentum- back to the upside. Traders who go long there, can use a move back below $1603-$1605 level as a stop loss. The topside targets on a break back above would be:

  • The topside trend line at $1625.50,
  • $1627 (the 38.2% of the move down from the 2012 high),
  • $1646 (200 day MA) and
  • $1658.65 (50% of the move down from the 2012 high).

When the market non trends like Gold is doing this month, it means the market is unsure of direction. Buyers and sellers are at a stalemate. Eventually that stalemate will be broken and the price will move/trend away. Will it happen tomorrow, the next day, next week? We do not know. The longer the non trend the better the chance for a move. Moreover, since risk can be defined and limited, traders who are monitoring the key levels can manage risk and look for the break and progression to higher (or lower) levels. Be aware. Be prepared. Be patient and look for the opportunity.