The bars on the COT chart are quite extended (light blue bars poking out the top of the chart while the dark red bars are pointing out the bottom of the chart) so longing gold does not appear prudent right now. The COT hints that gold should start to roll over to the downside. Looking at the daily chart over the same one-year time frame, a developing head and shoulders (H&S) pattern is forming with the right shoulder now in place as the COT appears to be indicating a top is near.
The H&S neck line is 1220, head at 1280, you can look at the charts and fine tune the projections, so that is 60 difference, so the downside target for the H&S would be 1160 (1220-60) if the neck line at 1220 ruptures.
The green lines show the positive divergence that bounced price late last year. Keystone pointed this out at the time to long gold along with the low points on the COT chart. The red lines show negative divergence placing a lid on price after the parabolic rally during January and February. The chart indicators are staggering sideways as price is digesting the energy from the big bull run. The pink boxes show that the gold downtrend last summer was strong but petered out at Labor Day. This led to gold price staggering sideways from last summer to early this year through 1060-1180.
The pink box on the right shows how the trend higher in price was very strong and expected to continue--until about two weeks ago. The ADX drops down to 21 indicating that the strong upside rally trend is over. If bulls do push higher, watch the ADX to see if it moves above 25 and 30 to indicate the resumption of a strong upward trend. For now, however, the gold bears smile at the lower ADX.
The gold monthly chart remains encouraging for higher highs in prices. Thus, the forecast would be for a pull back in gold going forward with price moving sideways to sideways lower into the green circle. Gold would be in serious trouble if 1220 fails; price would likely want to seek out 1180 and the H&S target at 1160. The gold weekly upside trend continues. So a pull back may be short and swift, say during this month of April, price will come in but then price will recover and move higher again a few weeks down the road. Gold at 1260-1340 is doable say into mid to late summer say June-August but may first have to move down to 1160-1180 in the nearer term.
Keystone is not trading gold right now but if so, would consider scaling in short this week and target the lower prices in the green circle whereby the trade would be exited and flipped long as spring continues into summer. The COT chart is overextended and for it to correct itself would correlate to gold dropping in price in the near term (April maybe into early May). Watch the 1217-1224 range as serious support with trouble very likely if it fails. To begin the week watch the 20-day MA at 1237 and 50-day MA at 1221 that are squeezing price in to make a move; price is sneaking out to the upside. Watch the 20-day to begin the week. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
NOTE: The gold COT chart is provided by our friends at Cot Price Charts a very useful site. The COT chart is annotated by Keystone.
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