I’ve received a lot of question on gold ($GLD) recently, hence time for an update on Gold. Remember big patterns take time to build and it takes patience to see these patterns come to fruition, although sometimes one does get instant gratification 😉
Case in point: On May 21 in Gold going Bull we posted this chart with Gold at $1277 with a technical target of $1520:
That target was reached only a few weeks later on August 7 when Gold hit $1520:
— Sven Henrich (@NorthmanTrader) August 7, 2019
That was a massive 19% move in just 2.5 months.
While Gold initially retraced from that $1520 target (it was a technical pivot) it then even exceeded our target and reached $1566 this summer and has been retracing since then.
Many of the questions I received are centered around why Gold is not moving higher, is the bull phase for Gold over? To which I say: Patience everybody. Gold is not a dot com stock. The move from 1277 to 1566 was a massive 22% ripper. In process Gold became overbought and put in a negative divergence. A retrace not only made technical sense, it’s also necessary to prepare for the next bull phase if there is to be one.
And judging by the pattern Gold has been putting in since the summer highs it indeed looks to be preparing for another bull run in form of a bull flag/falling wedge:
What’s the flag/wedge suggest? Firstly that it eventually wants to break higher, but also that downside risk first is also in the pattern. This pattern is not confirmed yet and from my perspective still in the build phase and wouldn’t be confirmed until it sustains a break above the upper trend line. The downside risk can be defined by the .382 fib as support as well as the lower tend line.
As long price resides inside the 2 trend lines the pattern remains intact, but unconfirmed.
The target if the pattern confirms with a sustained break above the trend line? That’s where the larger weekly chart gives us a hint:
Given the size of the flag new highs above $1566 into $1625 could be reached.
Timing? Unknowable at this point as the pattern has yet to be confirmed. But a note in advance here: New highs on Gold could well produce a negative weekly divergence setting up for another larger retrace, but note that since its trend line break above resistance in late 2017 Gold has been working to break above multiple resistance levels, build a larger inverse pattern in 2018 and 2019 and has continuously succeeded in playing out bullish patterns.
And until there is evidence of that changing and we see bullish patterns failing and bearish patterns emerging Gold remain in a bullish trend and could well end up targeting its 2011 highs in due time.
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Categories: Market Analysis