By Andrew Nyquist
After a fast and furious run of higher prices in June and July, Gold topped out and fell 20 percent, prompting many analysts to state that the yellow metal had experienced a blowoff top formation similar to its glitter twin Silver. Analysts also questioned whether precious metals were a good place to be. Fair enough. But with the combo platter of Greece, Italy, and the European debt crisis, alongside the recent MF Global bankruptcy filing, Gold is rising again and many investors are taking note. The question now is whether this is a relief rally destined to fail soon or if it is the start of a larger move higher?
Well, here’s the breakdown: If the markets are truly worried about debt destruction and deflation, then gold will suffer a similar price breakdown to Silver. But if the markets are sensing something more dramatic out of Europe and perhaps a larger hit to the dollar or monetary policy at home, then Gold may have some room to run. Gold is currently pushing up against its upper channel resistance and looking to break above 1760. A strong, high volume close above this level followed by a second day price hold may indicate another retest of the highs.
Looking at the annotated chart below, I think it is interesting to note that each of the previous 3 significant lows for Gold aligned with lows in its RSI (relative strength indicator). Will number 4 pave the way for new highs just as the previous 3 “lows” did? We’ll see. Watch key support and resistance levels closely, and follow the news!
Note that the proxy etf (exchange-traded fund) for gold is SPDR Gold Trust (GLD). Happy investing.
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No positions in any of the securities mentioned at time of publication.
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