Gold Sentiment, Price Cycles Point To Higher Prices In 2014

Precious metals began 2014 as one of the best asset classes to be in. But since mid-march, Gold prices have drifted lower, retracing more than 50 percent of the prior move higher [into December of 2013]. And this has pushed Gold sentiment lower as well, pressuring bulls to dig deep once again. But when sentiment gets too bearish, it often is a precursor to a rally.

From a macro technical perspective, Gold prices have been in a range for almost a year now (from $1180-$1430). And this price action has assisted in forming some type of technical base here, while grinding Gold sentiment lower. So where do gold prices head next?

If we take a look at the chart below, Gold prices appear to be forming an ugly inverse head and shoulders pattern which could lead to a major breakout to the upside. That breakout level sits around $1360-$1380. If the price of Gold can get above that level, it is possible that Gold can breakout from the extended downtrend it has been in since late 2011. Downtrend resistance is currently around $1450-$1475.

Note the blue boxes below as well. Those shaded areas represent important cycle highs in Gold.  The Gold market is about half way through this current cycle which gives it a lot of time to move higher. As well, shorts are piling in confirming bearish Gold sentiment and opening up the possibility of a squeeze higher in the price of Gold in 2014.

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gold sentiment and gold prices bottoming June 16 2014
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The material provided is for informational and educational purposes only and should not be construed as investment advice. All opinions expressed by the author on this site are subject to change without notice and do not constitute legal, tax or investment advice. At Castle Financial, securities are offered through Cadaret, Grant & Co., Inc. and TD Ameritrade, Inc. Members FINRA/SIPC.

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No position in any of the securities mentioned at the time of publication.  Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.