Market Analysis

Gold going Bull?

Is Gold about to go full bull? Let’s check some charts.

Before we do, some basic price facts: Gold peaked in 2011 just above $1900. Since then it’s been an exercise in dread for gold bugs (Disclosure: I have no position, not trading Gold myself). Gold bottomed in early 2016 and now it’s back in the same price range it’s basically been in since 2013.  So basically the price of Gold has gone nowhere over the past 6 years which could be interpreted as a consolidation range.

While the price chop may seem arbitrary we can however discern some structural conclusions on a larger time frame chart:

2 key trend lines:

A supporting trend line from the 2008 lows connecting the 2015/2016 lows and the 2018 lows. Price remains above this trend line.

A trend line that formed resistance off of the 2011 and 2012 highs and represented resistance in 2016 and initially in 2017. Price has broken above that trend line in 2017 and has remained ever since.

Bottomline: Trend line resistance has been overcome and trend line support has been affirmed. Combined these events are supportive of a potentially larger bullish outlook.

However price has really not make much progress. In the chart above one may identify a potential bull flag, that has risk back to the support trend line.

Taking a closer look we can see an additional pattern, and I present a structure identified by my better half Mella, a potential inverse pattern on Gold:

To be clear: This is not a confirmed pattern, it’s a potential pattern, but it comes with the aforementioned bull flag as well. To see confirmation Gold needs to move solidly above 1350-1380, a perhaps tall order in its current configuration, but that pattern, if triggered may be quite powerful as it implies a $1520 target.

When is the pattern and support structure invalid? A sustained drop below 1250 would spell trouble. 1250 represents confluence support of the long term support trend line and the .236 fib level shown in the earlier chart.

Another way to think about the setup? Risk/reward. If the pattern plays risk can be defined as 1230/1250 and upside reward to 1520, or about 3% downside and 19% upside from current price levels.

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