Attacking historical high
Now, as the price has breached the historical high, it is very important that the price manages to stay there.
The risk here is that even though the price has made the breakout, if the higher prices are not accepted as “fair value prices” then the price would break and fall sharply down.
In order for the price to rise, there is a need for buyers who are willing to buy for those high prices! Ask yourself this: “If I was a financial institution, would I buy at historical highs after a crazy fast uptrend? Isn’t that too expensive?”
My own answer would be: Hell yes, it is expansive!! I am not paying $2.000 for this!
If I really wanted to buy some Gold, then I would wait until:
a) Higher prices got accepted – which means that price started to rotate above the $2.000 mark.
b) I would wait until the price dropped and I would buy cheaper.
This brings me to another point – How deep does the price need to drop in order to get me interested?
Strong support at 1710 – Volume Profile analysis
In my opinion, the best place to jump in a long trade is around 1710 mark.
Why is that?
If you use my Volume Profile indicator and look at how the volumes were distributed throughout the last couple of months, then you will see that a lot of trading positions got placed around the 1710 area.
What I think this means, is that in this area, buyers were entering their long positions slowly. The big institutions were getting ready for a big push.
When they have slowly and unnoticed accumulated their long positions, they started an aggressive buying activity. This activity snowballed, everybody started to join in the new buying, and the price started to rise sharply.
Now, if the price drops back into the 1710 zone again, those institutions will become active again. This zone is important for them, because they placed a lot of their volumes there!
This is why I expect they will try and drive the price upwards from there again. In my opinion, this is the place to buy cheap.
Below is a Gold chart on Daily time frame with Volume Profile: