Good morning FX traders, I hope you are coming back refreshed from a great weekend. Monday has started with some serious fluctuations, though most of it wasn't tradeable as the market opened with a huge gap. Here's how we can trade the gap in gold.

What's the GAP?

Newbies, the gap refers to the area where the price of a currency, stocks, indexes or a commodity moves sharply bullish or bearish, leaving no sign of trading in between candlesticks or the bars on the chart of that security. It is normally caused by a sudden change in fundamentals in the market.

Why did gold open with a gap?

In my previous updates on gold, I mentioned the uncertainties caused by North Korea and the United States. Over the weekend, the risk-off sentiment strengthened when North Korea’s latest nuclear test prompted a knee-jerk shift to safe haven assets, causing some serious drops in the equity markets. Read more about North Korea. 

How to Trade Gaps?

Historically, gaps are meant to be filled the same day, if not, then in the upcoming days. So, we can expect gold to drop gradually to $1325 until it covers the gap.

Gold – 4-Hour Chart – Bullish Channel 

Gold Trade Plan

Looking at the 4-hour chart, the yellow metal is holding right below the upper corner of a bullish channel, testing the ascending trend line resistance at $1337. It's leaving us with two options:

Sell – Below $1337 with a stop loss above $1340 to target $1325.

Buy – Above $1324 with a stop below $1320 and a take profit at $1332.

Good luck fellows, looking forward to another profitable month.