Gold - Is This Finally the Move Goldbugs Have Been Waiting For?
Gold finally makes a decisive swing higher, and though there are still several levels of resistance ahead, this could be the beginning of the next bull run. Or not, Gold is an extremely slow mover and as every goldbug knows you have to have patience. No group of investors is more patient than goldbugs. Often moves take years to develop, but when Gold finally hits its stride, momentum can be solid.
Remember markets are made up of various participants. You have short term and long term investors, day traders, swing traders and momentum traders just to name a few. There are numerous strategies and the initial swing higher was likely short and longer term investors going to risk off and allocating some capital to Gold due to geo-political uncertainties. Swing and day traders recognize the breakout and jump in on the momentum play providing a strong impulsive wave iii.
There is no reason to short Gold here, regardless of position or Fibonacci levels because momentum is clearly to the upside. We are personally looking for a setup to go long here, though there is no signal yet. We have an interim target of 1370-1380 to complete the cycle, the key is does it break out or do geo-political risks settle down, and Gold pulls back.
Lets zoom out at the broader monthly chart.
The broader chart really paints a picture of where we are in the Gold cycle. Though this move has been quite solid and we expect a final swing higher in the short term, Gold has been range bound over the past 6-7 years. Until the range is broken and a broader trend is in place, there is nothing to do but accumulate under the 1300 level until Gold starts to trend.
Remember as analysts we are always looking for order flow. From 2013-2016 Gold was highly volatile prior to flushing out the last of the weak hands in 2017. Even though from 2017 the rally was still volatile, the previous dip was uniform and distributed, resulting in a nice symmetrical balance and forming what is referred to as the cup and handle pattern.
Eventually Gold will break higher, and though the cup and handle pattern looks enticing, until we break through 1370 and hold, we assume the upper range will hold. Once it does Gold should be on its way towards our preliminary final target of 2600 which is nearly double the current price. This is not going to happen over night and will likely take several years.
We never know what will trigger the next rally in Gold, but we are confident that there will be one. Those that had the patience to accumulate at lower prices will be rewarded nicely. Generally when Gold is at it's peak the market is at it's trough, making it a good time to lock in profits and buy back into stocks.
There are several ways to play Gold, one being the miners. Miners increase exponentially as Gold rises due to their profit margins increase with higher prices. Buying the GDX or GDXJ is another mechanism to have exposure to the Gold rally, and both of these instruments should outpace the gains in Gold once the rally starts. Until this time it is simply accumulate when Gold is out of favor with the market.
In the end I am long term bullish on Gold, but this should be no surprise!
Remember markets are made up of various participants. You have short term and long term investors, day traders, swing traders and momentum traders just to name a few. There are numerous strategies and the initial swing higher was likely short and longer term investors going to risk off and allocating some capital to Gold due to geo-political uncertainties. Swing and day traders recognize the breakout and jump in on the momentum play providing a strong impulsive wave iii.
There is no reason to short Gold here, regardless of position or Fibonacci levels because momentum is clearly to the upside. We are personally looking for a setup to go long here, though there is no signal yet. We have an interim target of 1370-1380 to complete the cycle, the key is does it break out or do geo-political risks settle down, and Gold pulls back.
Lets zoom out at the broader monthly chart.
The broader chart really paints a picture of where we are in the Gold cycle. Though this move has been quite solid and we expect a final swing higher in the short term, Gold has been range bound over the past 6-7 years. Until the range is broken and a broader trend is in place, there is nothing to do but accumulate under the 1300 level until Gold starts to trend.
Remember as analysts we are always looking for order flow. From 2013-2016 Gold was highly volatile prior to flushing out the last of the weak hands in 2017. Even though from 2017 the rally was still volatile, the previous dip was uniform and distributed, resulting in a nice symmetrical balance and forming what is referred to as the cup and handle pattern.
Eventually Gold will break higher, and though the cup and handle pattern looks enticing, until we break through 1370 and hold, we assume the upper range will hold. Once it does Gold should be on its way towards our preliminary final target of 2600 which is nearly double the current price. This is not going to happen over night and will likely take several years.
We never know what will trigger the next rally in Gold, but we are confident that there will be one. Those that had the patience to accumulate at lower prices will be rewarded nicely. Generally when Gold is at it's peak the market is at it's trough, making it a good time to lock in profits and buy back into stocks.
There are several ways to play Gold, one being the miners. Miners increase exponentially as Gold rises due to their profit margins increase with higher prices. Buying the GDX or GDXJ is another mechanism to have exposure to the Gold rally, and both of these instruments should outpace the gains in Gold once the rally starts. Until this time it is simply accumulate when Gold is out of favor with the market.
In the end I am long term bullish on Gold, but this should be no surprise!
