Is It Time To Buy Gold Again?

Gold has been a major topic of discussion thus far in 2015. We saw Gold prices make a violent move up at the beginning of the year only to fall just as quickly in February. It feels like Gold has been in a bear market for years and years, but amazingly, it’s been fairly stable for the last year and a half.

To get a better idea of what is happening with gold prices, let’s look at both the GOLD ETF (GLD), followed by Gold Futures (GC).

Zooming out on the GLD chart, we see a major false breakdown. Now, price is back at the key support zone. The 114ish support area has held as it did in June 2013 as well as January and October 2014. So if one were looking to get long, they could do so versus ~114, ~112 or ~110, depending upon risk tolerance. Upside target zones would depend on intentions and timeframes but some levels worth noting are 119, 125 and 138.

Gold (GLD) Chart

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gld gold etf price chart_basing pattern_2013-2015

It is also worth noting that although Gold prices suffered a sharp recent drop, momentum on a weekly time frame is vastly improved from the other times it touched support.

The major support level also coincides with the 78% retracement of the advance off the lows. Retracements this deep are a characteristic common of first waves in Elliott Wave Theory. Is this a new first wave out of a head and shoulders pattern?

Gold Futures (GC) Chart

gold futures price chart_gc_2014-2015

Also noticeable is how the various Fibonacci retracement levels from the absolute low and the right shoulder low line up around 1200, 1220, and 1240. This is a harmonious market!

I am beginning to see some signs of a potential bottom here in Gold prices and perhaps a great area to take a shot on the long side with a reduced amount of risk.

Even if Gold is going to break down further, it seems logical that we would see a bounce at such a key support level.

Do we know the idea will work? No, we never do. And that is why we try to find good risk-reward setups and use stops to minimize risk. Thanks for reading!

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No positions in any mentioned securities 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.