Gold may underperform for a while

Gold has been heading towards its longer termed target of 1300-1350—noted about a year ago on this blog. This target is derived from technical resistance that held steady during much of 2013 and a longer termed downtrend line drawn from 2011. A crack of that zone to the upside would be favorable for longer termed upside to the metal. Time will tell if that occurs, but traders will certainly be aware of the risk potential as/if/when gold reaches this target.

GOLD target

Neartermed potential is a little shaky at this point. Gold is bouncing off of $1220 on the daily chart. RSI and stochastics – the shorter termed momentum oscillators that I watch – are low but have not hooked up yet. MACD—a longer termed indicator, is trending lower. More ominous is the trend towards falling moneyflow (Accum/Dist line, bottom pane). That, along with a flat to neartermed declining  Comparative Relative Strength line (Gold vs. S&P500) may be reasons to wonder if gold may be stagnant or short termed bearish in the coming weeks.

gold neartermed

We hold a minor position in gold (3% of the portfolio). Seasonality picks up later in the summer for the metal – perhaps then will be a better time to consider adding to a gold position if you are watching this trade.

 

Keith on BNN Monday May 30, 1:00pm

Nov 2012 small

I’m doing the afternoon show next Monday May 30th from 1:00PM – 2:00PM. Call in with questions during the show’s live taping between 1:00 and 2:00 pm. The toll free number for questions is 1 855 326 6266.

You can also email questions ahead of time to [email protected] – it’s important that you specify they are for me.

5 Comments

  • I like to keep an eye on volumes and set MAs at 100 days and 20 days, on the basis that stocks cannot truly rise without market participation. When the 20 day volume is below the 100 day MA and yet the issue is rising (which is happening right now with a big number of stocks) caution is advised.

    My question is, for this purpose, would you use 50 day and 20 day MAs or would the 100 day and 20 day provide the info just as well?

    Looking forward to you show on Monday.

    Reply
    • Hi Fred–that is a good question–and you are right in using volume to look at participation. I cant say that I have the answer to your question as to which length, and combination of MA’s is best. I will say that the Accumulation/Distribution line will help with understanding market participation if you apply it against any index or stock (or commodity) that supplies volume. It essentially tracks up day volume (net) vs. down day volume–and adds or subtracts the number cumulatively to the line. I like it better than straight volume–as it shows the significance of volume (more volume on a big move in one direction occurring regularly will show as a rising or falling trend on the Accum/Dist line).

      Reply
  • Looks like there’s a rotation into financials and tech going on lately and coupled with general pessimism on the market we could see new highs in the S&P soon

    Reply
  • Do you think there will be an interest rate hike in June? How do you think gold will be affected? Thanks.

    Reply
    • John–this is a question for an economist, not a technical guy!

      Reply

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