Charts from NinjaTrader and indicators from Quantum Trading

Last week was a positive one for gold as it recovered from the lows of $1851 per ounce. It regained the $1900 per ounce handle on Friday and posted a strong closing day on good volume, all before it closed the session on a wide spread up candle at $1916.30.

Whilst the longer-term outlook for gold remains bullish, the next few days are likely to be a struggle for the precious metal if it is to continue this upwards momentum, and a glance at the daily chart reveals why.

First and most importantly, we have the volume point of control which is immediately ahead in the $1954 per ounce area and denoted with the yellow dashed line. This marks the heaviest concentration of transacted volume in this time frame and also represents fair value, and it is where one can expect to see prices congest as it is approached. So as gold moves to $1950 per ounce and beyond, expect to see some sustained sideways price action in this area.

Next, we have significant resistance above this at $1975 per ounce, and it is denoted with the red dashed line of the accumulation and distribution indicator. As we can see, this is a level that has already been tested five times in the past and is, therefore, a strong area that is painted by the indicator and also confirmed with a numerical value alongside it.

Finally, we have the wedge of volume, which is described by the volume point of control histogram which extends up to the $2000 per ounce price point. After this, it falls away dramatically. This volume acts in the same way as price-based support and resistance, and so it is going to take sustained effort to drive gold from the current price at $1926 per ounce through the VPOC, and on towards the $2000 per ounce price point.

In the longer term, this level and higher will be achieved, but it may take some time given the technical issues ahead for the precious metal.