John: There was an article yesterday by the Associated Press with the headline: “Census: 1 in 7 Americans lives in poverty”.
It opened by stating that ranks of the working-age poor has climbed to the highest level since the 1960’s as the recession threw millions of people out of work last year, leaving one in 7 Americans in poverty. Also, the overall poverty rate climbed to 14.3 percent, or 43.6 million people, the Census Bureau said yesterday in its annual report on the economic well-being of U.S. households. The report covers 2009, President Barack Obama’s first year in office.
The poverty rate increased from 13.2 percent, or 39.8 million people, in 2008.
This is referring to the economic state of the richest and most powerful country on the planet. This report should make every investor think twice as to where to place his investments. Remember, the first rule of investing – “Protect your Capital”. It appears more and more investors are choosing Gold to safeguard their futures as we shall see from our analysis of the Gold market.
Yesterday the price of Gold opened at $1,268, drifted to a low of $1,265, rose to a high of $1,278 and then closed at $1,275 – an increase of $7 on the day and $29 on the week so far. Last week, on Wednesday, we saw Gold fail to get through the previous high resistance at $1,260. Then for 3 days it consolidated and retraced down to $1,240 before blasting through the resistance on Tuesday this week. As of 7:30 am Pacific time today, Gold is trading at $1,276, essentially unchanged after hitting a new record high earlier today of $1,284. Below is the updated Gold chart, followed by my analysis, after yesterday’s trading:
Looking at the 2-year weekly chart we see that Gold is trading in an upsloping channel which started in January, 2009, and is strongly supported by the weekly 50-day moving average (SMA). Both the weekly SMA (50) and SMA (200) are pointing up in bullish orientation. The top line of the channel (blue) is resistance and the bottom line (green) is support. The dotted blue line is an inside trendline (resistance). Even after this large recent increase there is still a lot of room for the price to go higher before reaching noted resistance.
Looking at the indicators:
We see that the RSI has plenty of space to move up before becoming deeply overbought – bullish.
The Slow Stochastics also has room to move up and can remain in the overbought area for several weeks as the trend strength increases – bullish.
The Bollinger Band Width (BBW) indicator has just moved up from a relatively low position. This indicator is a measure of the vertical distance between the two bands and when this indicator is low it means the bands are close together which indicates a near-term increase in volatility. Thus, volatility has started to increase and Gold has moved up in price. This indicator can move a long way up before reaching a previous high so we can expect volatility to continue for the near and intermediate term.
The BBW can also be used to confirm Stochastics crossovers. Wherever possible do not rely on just one indicator. I have shown the crossovers with thin vertical blue lines and low BBW values by thin vertical orange lines. The chart shows the crossovers precede the BBW lows, therefore by waiting for the BBW low and reversal the investor can confirm the upward move and may also determine a better entry point.
Outlook: I expect Gold to continue to climb within the channel for a considerable time and reach a minimum of $1,300 in the near future.