Gold broke above the psychologically important $1,200 barrier Friday and while it is still at a strong resistance level, the action in Gold over the past couple of weeks is encouraging and in line with our expectations. Near-term technical momentum has swung in favor of the bulls, and the fact the CDNX started moving ahead of Gold last month and is looking very strong right now suggests the outlook for the yellow metal over the coming months is extremely positive. Today, BMR’s technical analyst provides an updated Gold chart and analysis:
John: Why are we at BMR so high on Gold?
The answer is very simple: “If the markets go down, Gold will be fine. And if the markets go up, Gold will be fine too.”
The above quote is from a recent article which I have since lost (sorry about that) but I believe it hits the nail on the head.
So today we take another look at the price of Gold (continuous contract).
On Friday Gold opened at $1,195, drifted lower to $1,193, and climbed to a high of $1,211 before closing at $1,205 for a gain of $10 on the day. This was the 8th consecutive session to the upside.
Looking at the 6-month daily chart we see that the support at $1,160 (horizontal green line) held and the price of Gold has climbed steadily to reach the resistance level of $1,211 (horizontal blue line) on Friday. The SMA-50 (blue line) which provided support between the beginning of April and the beginning of July is flat and also at this resistance level. The SMA-200 is providing strong support and is pointing upwards.
Looking at the indicators:
We see that the RSI has crossed above the 50% level – bullish.
The Slow Stochastics has the %K (black line) high at 85% but this is no problem as the %D (red line) is still low at 46%. On April 1 (vertical green line), the %K was high but the price of Gold rose a lot higher before topping out. The %K crossed above the %D at a low level (blue vertical line) which indicated a strong move up. Thus, we can expect the bullish strength to continue.
The ADX trend indicator shows the +DI (green line) has crossed above the -DI (red line) for the first time since July 1, and the ADX trend strength indicator (black line) is flat and ready to turn up. A bullish trend is about to begin, which coincides with Gold’s typical period of seasonal strength.
Outlook: Gold is at a strong resistance level but with the bullish positions of the RSI, Slow Stochastics and the ADX – all showing the start of a new bullish trend – I believe we will see Gold overcome this resistance in the near future.