Market Analysis

Technical Setup: Gold

Time to follow up on a technical set up I had posted publicly on Gold in October. Remember big swings are a journey in patience not a sprint in day trading panic. Last May we had posted a long technical set up for Gold when it was trading at $1277 with a $1520 target (See also Gold going Bull). Gold then reached that target with a ferocious rally by early August 2019. Gold then subsequently became very overbought and we had closed that set-up.

Then in October Gold again showed another technical pattern that suggested another new rally to new highs was to come (Gold going Bull II).

This was the chart I showed then:

The target range outlined then: “Given the size of the flag new highs above $1566 into $1625 could be reached.”

I’ve tracked versions of this chart on twitter for months and it was interesting to see the pattern unfold. I’ll share a few samples here:

Clean, patient, no drama. Pattern build and then breakout.

And this week the pattern kicked full into target mode with $GLD reaching 1590:

So that’s 2 bullish Gold plays within less than 1 year.

But now it gets tricker. Firstly note the big negative divergence on these new highs on the chart above. It’s a concern I raised in this weekend’s market update video. As the pattern target range has been generally reached I see the set-up as concluded. For Gold to not see this as a rejection for an interim top it needs to really keep pushing higher in the days ahead.

Secondly, note that Gold also just hit its .618 fib retrace from the 2011 highs:

That’s confluence resistance, between a pattern playing out and technical resistance not only informed by the .618 fib, but also by the 2011 and 2012 corrective lows that subsequently broke as support in 2013.

So bottom line: I’m now a lot less bullish in Gold than I was last year. Call me now more cautious especially now that suddenly everybody is getting bullish Gold. Case in point: Goldman Sachs suddenly jumping on the wagon now calling it a good long hedge. Now.

We’ll see. We got bullish Gold last year at $1277 for a $1525 target, and then again when Gold retraced to $1494. Now that it’s hit 1590 and reached our technical target resistance we simply wait for the next set-up.

To view previous setups please visit the Technical SetUps section of the website.

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4 replies »

  1. Sven, thanks for updating that! But does the Iranian attack on US bases in Iraq change the gold trading strategy? I would think there would be a flight to safety in investments – that is toward buying gold. Your thoughts?

    • Yesterday definitely saw a spike in $GLD aftermarket, after the news of the Iranian retaliatory strikes on bases in Iraq.


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