Featured Content

TRIPLE YOUR MONEY IN A MONTH!

TRIPLE YOUR MONEY IN A MONTH!

Still worried about the economy? Become an elite charter member of George's DAILY PROFITS and you could... TRIPLE YOUR MONEY IN A MONTH! George gave us the $2.8-billion IT infrastructure provider, up 4,745.20%; the $1.8-billion advertising agency, up 1,295.44%; and the $762 million business software company, up 1,213.19%. Only charter members can follow George daily. Learn how here!

Where Does Gold Trade Next?

By

Where Does Gold Trade Next?The market view for gold has varied substantially this past year; this shift in the market view has also led to substantial volatility in the price of gold. Coming in at the lows of December 2011, gold was approximately $1,525 per ounce, rising in late February to just short of $1,800. That kind of volatility in a short period of time can be quite unsettling for gold investors.

Following this rapid move, the market view of gold subsided into a tighter, range-bound market. From May until the middle of August, the price of gold essentially traded sideways. This coincided with a market view in which geopolitical events complicated forecasting efforts by analysts and investors in the gold market. There was much concern that the Federal Reserve might withhold additional monetary stimulus, which kept a lid on the price of gold. With the recent release of economic data and additional comments by the Federal Reserve, the market view has become decidedly bullish in the gold market over the past month.

Several important points are evident in the charts for gold that indicate a dramatic shift in the market view by investors. First was a break of the downtrend in late July, which was then successfully tested in early August. Essentially, the market view has shifted from bearish, in which rallies for gold were sold into, to bullish, in which any pullback in gold is being used as a buying opportunity.

Gold Spot Price Chart

 Chart courtesy of www.StockCharts.com

This bullish market view is also evident in larger volumes on up days, as well as higher highs and lows. The next test was the 200-day moving average (MA), which was also successfully breached and subsequently held. Over the short term, the market view on gold might be slightly overextended as the Relative Strength Index (RSI) is indicating such a possibility and some profit-taking might ensue.

Gold Spot Price Chart 2

Chart courtesy of www.StockCharts.com

For a longer-term market view of gold, I put up a three-year weekly chart. This removes a lot of the noise that’s prevalent in a chart that covers only a short period of time. Following the highs in 2011, gold has seen a neutral to downward market view. Many rallies were used as opportunities for investors to sell their holdings of gold.

This market view, however, has just shifted, as gold broke through its resistance line. This now opens up the possibility of a retest of the high just above $1,900 per ounce. Also note that the market view regarding an overbought condition is not evident in the RSI on a weekly basis. This means that, while a pullback in gold over the short term might be possible, over the long term, it is not yet a worry that this move will be overextended.

The market view of gold is extremely dependent on central bank activity. With the Federal Reserve possibly enacting additional monetary stimulus, it might be possible that the current move in gold has already priced in the market view of any new policy initiatives. This might coincide with a “buy on the rumor, sell on the fact” trade. However, the weekly chart of gold does show more upside potential if the market view remains bullish following this week’s Federal Reserve announcement.

Premium Content

Secret "New Swiss Bank Account" Safest Way to 44% Returns

Secret

It's the safest—but, until now, completely ignored—place for your money. Because these elite "bank accounts" pay guaranteed 5% cash payments per annum on top of returns on capital exceeding 44%... Learn all about them here.

About the Author, Browse Sasha's Articles

Sasha Cekerevac, BA Economics with Finance specialization, is a Senior Editor at Lombardi Financial. He worked for CIBC World Markets for several years before moving to a top hedge fund, with assets under management of over $1.0 billion. He has comprehensive knowledge of institutional money flow; how the big funds analyze and execute their trades in the market. With a thorough understanding of both fundamental and technical subjects, Sasha offers a roadmap into how the markets really function and what... Read Full Bio »

Exclusive profit Confidential Presentation

Secret Retirement Plan Pays Up to $12,160 a Month?

Secret Retirement Plan Pays Up to $12,160 a Month?

A select group of Americans are retiring with a little-known retirement plan whose advertisement by its issuers is censored by Congress... Yet this plan enables Americans to potentially collect up to $12,160 in monthly income that's sponsored entirely by large-cap American companies. These secret Sponsored Retirement Plans are trumping social security by up to 10 times. And unlike mainstream retirement plans like 401(k)s or IRAs, SRPs are ideal for people who want to start with very little money. You could begin your SRP with as little as $10, $50, $100 or $400. To see real-life stories of folks who've built hundred-thousand-dollar portfolios thanks to SRPs and how to get your own plan started today, click here now!

×