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Support-Based Buying or An Opportunity to Sell? Gold in March’s First Week

2 Mins read

February was a difficult month for the buyers in the Gold Markets as the precious metal lost 7% of its recent gains from the January Rally.

Gold Daily Chart
Gold Daily Chart

The Timeline

  • The selling began on February 2nd, breaking a rising hourly range and triggering fresh shorts and longs to unwind from the bullion markets.
  • A small Bearish Flag was also broken on the Daily Gold Charts on February 9th, confirming the overall trend and triggering more fresh shorts in the markets. Throughout the month, the Precious Metal continued to make lower lows and lower highs on all Daily and Intraday time frames.
  • On February 27th, the Gold Markets found support around $1800, which acted as a previous breakout level and triggered some support-based buying. However, the Open Interest showed no signs of short covering until February 28th.
  • A Bullish Hammer formed on February 28th, causing an increase in the price alongside shedding off some of the OI, signaling profit booking by the bears.
  • Soon the market traded with a positive bias and broke $1825 which was the hourly falling trendline. This breakout further triggered some fresh buying in the metal.
Gold Hourly Chart
Gold Hourly Chart

What’s Next?

Even though we have witnessed significant buying in the yellow metal in the initial days of March, the overall trend still remains a bit questionable. The $1860-70 remains a strong resistance area for Gold. Given the fact that the similar region also was the breakdown region for the Bearish Flag as highlighted in the charts. It is very rational to assume that the bears will try to push Gold back down from $1860-70 to the rising trendline as highlighted in the charts.

The major question is will the buyers defend this trendline? With Gold trading in a range where both buyers and sellers are highly active, it is pretty rational to assume that the coming one to two weeks will remain highly volatile for the Gold Markets. In cases wherein both the buyers and sellers are active, the markets often witness a range-bound consolidation on daily charts. However, the markets are influenced by a ton of different factors. Any external events can trigger a good move on the both ends. Given the fact that the volumes are higher on the both ends, as soon as the market shows a direction the move in that direction is definitely going to be ferocious. Just remember to refer to the chart levels highlighted in the image.

Disclaimer:- The Author(Shivank Goswami) is an independent multi-asset class Investor and Trader, and not a registered Investment Analyst and Advisor. This article has been written for educational purposes only and should not be considered as an Investment or Trading Advice. Kindly contact your authorized stock advisor before taking any trades or investment decisions. Past performance is not a guarantee for a future return, nor is it an indication of any future performance. The information contained in this article has been compiled from a variety of official sources and is subject to change at any time without notice. Both the Author and GoldLane give no assurance or warranty that information on this site is current and accurate, and take no responsibility for matters arising from changed circumstances or other information or material which may affect the accuracy of the information on this article.

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About author
Shivank Goswami is an independent Multi-Asset Class Investor and Trader. He specializes in analyzing and trading various derivative markets. His articles are primarily focused on simplifying complex financial market concepts. Lately, he has authored an e-book (available on amazon) titled, 'Hedging Bullion Trades- Why Trade Naked, When you can Hedge?' -Title Contribution by- Ms. Adhishwari Singh (Ma'am) The book explores several ways by using which Bullion Traders can Hedge their Bullion Futures positions that too, without using the Illiquid Options segment.
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