The technical analyst will use a number of methods when reviewing commodity markets. These methods typically include such things as Price Action (pattern recognition, candle stick charts, Elliott Wave analysis, etc.), Seasonal Factors and Technical Indicators.

Given the nature of the question this response will focus on the latter.

When trading commodities, a technical analyst will most likely use the same indicators on a chart to predict the future as with many other instruments (e.g. equities). When looking at the big picture, charts that reflect long periods (e.g. weekly or monthly) should be used to assess the primary trends. Shorter period charts (e.g. daily) are used mainly to determine the entry and exit point of a trade.

Gold steadied on Friday after recent gains that lifted the metal to its highest since November, keeping it on track to end January with its strongest monthly climb in a year.

Technical Indictors fall into different categories, but the Indicators that most technical analysts use are a measure of momentum.

Momentum Indicators, as the name suggests, measure the momentum behind the move. Just as a car will struggle to move forward without a foot on the accelerator, so too will a market struggle to move higher if momentum begins to falter. On the downside, once downward momentum begins to abate, the prospect of stability and a renewed upwards trend begin to improve.

Momentum Indicators fall into two broad categories, Trend Following and Oscillators. Trend Following Indicators include Moving Averages, Bollinger Bands and Moving Average Convergence/Divergence (MACD). Oscillators encompass such indicators as the Relative Strength Index (RSI) and the Stochastic.

Before applying any of the Indicators, the trader or investor needs to firstly identify the type of market; is it a ranging or trending market? This needs to be determined because Oscillators are ineffective in trending markets, and similarly, Trend Following indicators are misleading in ranging markets.

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