Gold Futures - Potential Springtime Reversal

Gold futures have been on a rally, but recent price action suggests a potential shift. Could we be witnessing a Wyckoff distribution forming?

Understanding Wyckoff Distribution

The Wyckoff distribution pattern occurs when large institutions begin selling off their positions to retail traders before a downtrend begins. This phase is often characterized by sideways price movement, false breakouts, and key "Signs of Weakness" (SOW) that hint at an impending sell-off.

A Recent Sign of Weakness in Gold Futures

A possible sign of weakness in gold futures was observed recently when prices gave a false break out at what retail traders would label "key levels".

Historical Seasonal Trends: Spring Reversals

Looking at historical data, Moore Research Center, Inc. (MRCI.com) has tracked seasonal gold price patterns for over 40 years. Their findings indicate that gold often experiences price reversals during the spring months. This aligns with the idea that we could be heading into a seasonally weak period, increasing the likelihood of a distribution phase playing out.

What Traders Should Watch For

As Gold rallies back towards a new all time high we should be aware that it may be just a false break to form the final phases of a distribution schematic. This would form an upthrust, and upthrust after distribution, followed by a sharp retracement back into the range and ultimately leading to a sell off and market reversal.

Final Thoughts

While nothing is certain, the combination of the financial institutions footprint and historical seasonal data suggests gold traders should proceed with caution. Whether you’re trading futures or investing in physical gold, staying aware of these patterns can help you make informed decisions.

Do you think a Wyckoff distribution is playing out in gold? Share your thoughts in the comments!