Seasonality for gold has a brief moment of favorable performance starting around this time of the year. Gold can move positively between early January into early March—typical upside is in the 3% range according to www.equityclock.com.
However, the precious metal tends to experience flat to poor performance after that point from March until late July. The chart below illustrates the longer termed downtrend on bullion that has been in place since 2011. The longer termed bearish trend is firmly in place, and suggest that rallies, when they happen, would be of interest to near-termed traders only.
Should gold be played?
My thoughts are that the potential for an oversold bounce in bullion is pretty good. On the daily gold chart below, you will see some of my old annotations as well as my newest annotations—which are on the right side of the chart. Some of the daily chart momentum studies are showing a little life- possibly bouncing off of their respective oversold zones. Moneyflow momentum (top pane) is turning up, but cumulative moneyflow (bottom pane) is not. Sentiment is bearish for gold, but not quite in the “too bearish” zones on most of the sentiment studies that I look at on sentimentrader.com.
Given the above, any move on gold might be short and shallow. Target is $1160 – $1200 – which is the zone that lies between a gap-down point ($1160) and an old support point ($1200-ish) on the chart. Recall that old support becomes new resistance, should gold get that high.
Of note, I won’t be trading this one – there isn’t enough upside for me to step into the trade, despite a reasonable probability of some neartermed success.
Keith on BNN
I’ll be on BNN’s MarketCall Tonight show this Friday Dec. 30th at 6:00pm. Phone in with your questions on technical analysis for Keith during the show. CALL TOLL-FREE 1-855-326-6266. Or email your questions ahead of time (specify they are for Keith) to [email protected]