GOLD Daily Chart Negative Divergence

Gold daily chart continues to rise and price in the Middle East turmoil premium. Note the gap at 1390-1400 which will come into play in the weeks and months ahead. The key half-year range of 1315 to 1430 was broken to the upside recently. At this 1475 level, however, indicators are showing negative divergence across the board so a pull back is in order. The blue rising wedge is a bearish set up but the wedge would target 1500 at a projected apex.

To help forecast direction, watch the behavior in the RSI shown by the blue circles. With this price high of 1475, the RSI remains weaker, negative divergence, so gold shorts want to see this relationship hold. Gold bulls need to see a large bump in the RSI now that exceeds the early March bump, which will cancel out the negative divergence.

Typically when price reaches an 80 level, it prefers to move to the next 20 level, hence a close above 1480 should open the door to 1520. Gold bears do not want to see a close above 1480 while gold bulls want to see a close at the 1480 level and higher which will open the door to 1500 and 1520's. A two-leg bull flag which moves from 1310 to 1440, then consolidation, then the second leg starting at 1395 in mid March, would also target 1525.

The move from 1350 to 1475 results in a 125 Middle East turmoil premium built into gold currently, about 10%. Adding more ingredients into this witches brew, the euro charts are poised to sell off, and the dollar index charts are ready to bounce off positive divergence, which would reinforce the negative divergence posture shown for gold above, bolstering the idea for a pull back in gold price.

To further complicate matters, Joe Sixpack has not moved into the broader stock market as yet but Joe's funds are chasing gold, silver and commodities, gladly buying shares off the institutions that already enjoyed the ride up in these sectors.  This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your finanical advisor before making any investment decision.