I’ve been golds whipping boy for a few years now. And for good reason—the metal had been stuck in a giant consolidation pattern that offered no reason to buy into the metal – beyond short termed trades as it girated up and down in that consolidation. In fact, the long termed chart below was posted on a prior blog suggesting that the precious metal was forming a H&S bottom – but had yet to break the neckline at around $1360 or so. Well, guess what just happened? You can see on the long termed chart that gold is now through its neckline. The maintenance over $1360 will imply a target back into the old highs near $1800. From there, it will once again have a ceiling to break. We shall see how it looks when it gets there – no sense speculating at this point. But it does look good to return into the $1800 range.
The chart below shows us how early we are in the breakout phase. You really don’t want to see this neckline breakout fail. But odds are, it looks like it will hold. Sure, the shorter momentum indicators are getting overbought. But they haven’t hooked down yet. This gives gold a bit more time to work its way up past that neckline before it pulls back. Meanwhile, cumulative moneyflow is moving up – although still contained within its prior box. I’d say that its looking like it will follow-up with more positive momentum.
Meanwhile, the XGD ETF representing the producers is looking to have broken its downtrend, and through significant resistance.
This is the beauty of technical analysis – the discipline forces you to stay with the chart pattern. I’ve avoided gold for years. But now, I can finally say that the chart is bullish. I don’t own any gold directly as at this point, but I have taken a back-door approach by owning the SLV ETF (silver) for a catch-up play. This was explained on my BNN show on Thursday.
Keith at the Toronto MoneyShow Sept 20th at 4:15pm
Click here to learn about Keith’s upcoming MoneyShow appearance.