Gold hasn’t done me any favours recently. When GLD fell to a long-term support (blue dashed diagonal line) and then rose to break a weekly downtrend I saw it going higher and bought into a couple of gold stocks (NCM and EVN). Price rose to $1,900 making a new technical weekly uptrend in the process before rolling over and falling back heavily. I held on the basis price should kick up if/when it reached that long-term support line, however, price fell through said support by 4.5% to stop at the next support level below (around $1,680). Last week it moved up to close above that support making me a little more confident of the outlook for the precious metal.

Technically, price has not made a new weekly downtrend in the recent fall, so by definition it remains in an uptrend – another positive.

The week before last made a hammer candlestick which is a reversal candle when at the bottom of price action. The closing price for GLD has risen for the past 2 weeks (although last week was only up $1).

Elliott Wave Theory, while always a bit subjective, suggests that if the low of 2 weeks ago was a significant low then price is probably on Wave 5 which, if correct, means price should go back above the August 2020 high of $2,080. The recent rise to $1,900 and pullback to $1,680 could be Elliott Wave sub-waves 1 and 2, and if so, price could now be expected to rise strongly in sub-wave 3 until a theoretical pullback around $2,070 (a 161.8% Fibonacci extension of sub-wave 1 from the bottom of sub-wave 2). $2,070 is very close to the all-time high for GLD which is a significant resistance level that could cause the pullback mentioned.

Finally, Time Theory suggests price may change trend when it meets a time line. Time Theory is a bit Dr Whoish and even more subjective than Elliott Wave. While I don’t regularly use it in my day-to-day trading, it is always in the back of my mind. GLD seems to travel to a 72 days cycle. The vertical lines on the chart are 72 day cycles and while price hasn’t changed direction at every time line, it did at 8 of the last 9 time lines prior to the one that coincides with the low 2 weeks ago. Again, this suggests price is likely to move up.

GLD 20Aug21

4 June 2021

The post below analyises gold using the EFT GOLD which tracks spot gold. Another way of looking at the outlook for gold is to consider the gold sector index GXD which is a consolidation of the price performance of a range of listed gold producers. The sector chart below is overlaid with rescaled charts for EVN and PLS. EVN being a very large player in the sector has (not unsuprisingly) a good match with the sector. PLS on the other hand does diverge materially but the important thing to note PLS' price always comes back to that of the sector. Put another way it shows when PLS' price might be overbought or over sold.

What does the sector chart tell me? Gold is probably going to rise strongly for a period of time and see the sector head back above 9,900 It is possible that price could fall in the short term to retest the underlying blue dashed support line which the index has held above for some 7 years. After that retest (should it occur) price could be expected to one again move up strongly.

XGD compare 4June21

21 May 2021

I use GOLD (an ASX listed EFT that mirrors physical gold) for my analysis as the precious metal. I don't subscribe to commodity prices with my trading package and while the price of the EFT is different from that of gold, the patterns price makes should be the same for both.

Gold moved up strongly last week (2.4%) making it the longest and most consistent rally in the precious metal since June to August last year. Gold is still 20% above a line of support the price has held above for nearly 20 years and it is inevitable that at some stage price will fall back to that support - so there is always the chance this rally could evaporate. Price closed at an overhead resistance level on Friday and next week will determine if that resistance turns price down as it has before or (hopefully) the rally has sufficient momentum to break higher.

Gold 21May21

 

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Robert Norman

Phone: 0428 346 951
Email: robert@sharecharting.com.au

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