Gold, Technical Analysis Outlook

Gold, Monthly

The Monthly graph above shows the stellar performance of Gold over the past 25 years. From lows of under 300 at the start of the millennium up to the powerful trend to highs posted this year. This graph is all the more extra-ordinary as this is on a semi-log scale, which gives percentage gains the same scale on the Y axis. Detailing how the cumulative gains in recent years have matched the early gains posted back in 2000-2002. The 50 Day moving average is a near perfect straight line higher and it has hard to imagine the longer term bulls getting too concerned while the price action remains well ahead of support areas. Leaving a positive long term outlook, with only a break under the 2012 lows negating this optimistic stance

Gold & S&P 500 Overlay, Weekly

The Overlay graph above is quite interesting, the red region has the S&P 500 over the Gold price, while the green area shows where the Gold price crossed over the S&P500 over the time period graphed. This graph shows that during the equity market sell-off in 2007-2008 Gold gained, and then again during the equity market weakness in 2011, gold gained. So this chart is clearly describing that over the recent past gold has been widely used as a hedge for equity market nervousness. This pattern does not appear to be breaking down.

Gold, Weekly

The Weekly chart details how after a brief bearish trend in 2008, red region, the commodity posted a strong bull trend, white region. This move brought the metal up to all time highs, not inflation adjusted. From these highs the commodity posted a correction, and set up the very widely reported descending triangle pattern, red lines. A number of analysts and technicians on this bullish trend break did release bearish notes on the outlook for gold at the time. Clearly a trend break of this magnitude is significant. However due to the importance of this possible triangle formation we would not see the medium term buyers becoming too nervous while the $1,500 area holds. Leaving a more mixed medium term outlook, due to the trend break, but still with a bullish bias while $1,500 holds.

Gold, Daily

Drilling down to the Daily chart we can see this triangle formation in more detail. Gold broke higher in September, but failed to maintain the momentum through the 61.8% retracement area of the move, upper blue line. Which also coincides with the near term resistance area at $1,800. While the lower retracement level holds we have a bullish outlook on gold, with an initial target of the upside retracement level, $1,770, and the medium term resistance at $1,800. Traders can be seen using the $1,677 area as a possible stop, and we can see how gold found support off this lower retracement level last month. Leaving a trading buy outlook on gold here, albeit with possible near term resistance on any move to $1,770, breaks under $1,677 would open up downside targets to $1,527. Giving a long, medium and near term positive technical outlook on gold, using $1,677 as a near term stop area, and breaks under $1,527 for longer term profit taking.

Graphs Graph images are created on Bloomberg, and remain under copyright to Bloomberg

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