The past two months have seen the precious metals sector begin a choppy bounce higher. Several well followed traders have spoke of Gold’s promise, but success trading Gold or Silver futures or the ETFs (GLD and SLV) will likely depend on each traders risk-defined plan.
Currently, traders have the July low to trade against (wide angle), as well as a series of higher lows (the near-term trend) to trade against. If the action proves to be constructive, we’ll look back at it as a base building period that spurred a more lasting Gold rally.
But we’ll discuss the chart below in the context of price action in a moment. First, let’s discuss the global backdrop and some potential catalysts to watch that will either stall or spur the gold rally.
One item that should be on your radar is the coming US budget talks. The debt ceiling debacle was supposed to be cleared up by late September but lawmakers kicked the can down the road. There have been mixed reports about how soon this needs to be addressed (i.e. when the treasury will run out of money), but nonetheless, investors should pay attention to how this unfolds. As well, the Russian airstrikes in Syria have heightened tensions with the US.
And lastly, the US Dollar has been pulling back. This is putting a floor under Gold and helping to keep it up. We’ll see if Gold bulls take the ball and run with it. The US Dollar looks to have begun a bull market higher, but a pullback to 90-92 isn’t out of the cards. Back in April, I shared the following Fibonacci supports:
Should the US Dollar decline continue, note the following Fibonacci retracement levels: 95.61 (.236 Fib), 92.45 (.382 Fib), and 89.90 (.500 Fib).
Now let’s switch gears to the final arbiter: the price action. In the Gold charts below (GLD and Spot Gold), you can see the July low and subsequent rally. Both have put in a series of higher lows that should guide short-term traders. The recent higher low produced an island reversal, so follow through higher in the next day or two would be a sign of strength. Note that the 50 day moving average is curling up (constructive).
Nevertheless, GLD and spot Gold closed just above at over head resistance (the downtrend line). 110-111 on GLD is a weaker horizontal resistance zone for GLD, while stronger resistance will come in at the 200 day moving average around 113 (on GLD) and 1175-1180 on spot Gold. The price action around this level (if/when) will likely be tricky. But a breakout that sees follow through above the 200 day moving average would be huge for Gold bulls. But clearly, we are now getting ahead of ourselves and Gold has much to prove…
Gold ETF (GLD) – Daily Chart
Spot Gold Prices – Daily Chart
Thanks for reading and best of luck out there.
No position in any of the mentioned securities. 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.