GOLD Candlestick and COT (Commitments of Traders) Weekly Charts

Gold has been living the high-life since the May bottom at 1270-ish. Nine months later, the yellow metal is at 16 hundo. Traders and investors are tripping over each other to buy gold. Many read old textbooks they picked up at the dollar store that says buy gold if you are worried about the economy and markets. Gold continues to shine printing a whisker from 1600 last week.

However, with that higher high in price comes neggie d. Gold prints a higher price than the week before and higher than last August's top. The red lines show the chart indicators sloping down which is neggie d; the indicators are negatively diverging away from the SPX price that continues moving higher making new highs. It means price is out of gas and about to receive a spankdown on this weekly basis. The odd thing, however, is that the stock market is poised to sell off for a few weeks and you would think gold would catch a bid but the chart says gold will sell off with stocks. Perhaps that was such a hefty pop from 1250 a few months ago, gold is ready to digest some of that meal.

The gold monthly chart also shows neggie d for the RSI, stochastics and money flow which will work in unison with the neggie d in the weekly chart above and spank gold down over the coming weeks. However, the monthly chart has a long and strong MACD line. The MACD hints that a higher high will likely occur after the multi-week pullback. Thus, gold may drop a few weeks down to 1400-1500 but then would rally for a few weeks back up to a matching high around 16 hundo or higher.

The candlestick chart shows price rising into a wedge pattern which is bearish. The RSI and stochatics are overbot agreeable to a pullback. As mentioned the neggie d wants to create a multi-week smackdown beginning now or within the coming days. Gold has tagged the upper band for several weeks and needs to pull back to the middle band at 1512 and perhaps lower band at 1431. Price is extended above its moving averages requiring a mean reversion lower like occurred after the August top. None of this stuff is positive; it is all bearish on this weekly basis. The ADX shows that the weekly trend higher in gold price is a strong trend and remains a strong trend. However, the high in the ADX is lower than the prior high as gold made a new high; neggie d. 

For the COT chart, the green bubbles show where gold was at a bottom and began to rally while the red circles show tops where gold began to stumble. You can see the bars on the COT chart blown out to the far edges, top and bottom, so it is logical to assume that they would work their way back, to absorb the big multi-month price gain, for a week or few.

The blue circle shows the orgy in precious metals to begin the year with gold well above 1600. The lower bars of the COT chart show how there is less enthusiasm for this current price high in gold five weeks hence; neggie d. The expectation is for a pull back in gold and it will be several weeks, but after that, gold should move higher again back up to 1600 again say in April or May. There is a lot of price congestion at the 14 hundo level from last summer so price may go back down there to look around.

Since there is strong interest in gold nowadays and there will likely remain a base bid in play for the yellow metal, the pullback may be subdued and the negative divergence may not extract the revenge that it typically does. Price may only come down to tag that middle band at 1511 and then want to bounce again. You will have to se how it goes; in a couple weeks the gold price will be soggy and moving lower and you can check the charts out then.

Keystone does not have trades on in gold currently. Obviously, the play is short on the weekly basis from here forward; there are plenty of ways to play. Short GLD. Short IAU. Short UGL (which is the 2x gold long). Long GLL (which is the 2x gold short). Gold may develop into an attractive trading vehicle for this year if it develops into a trending sideways channel. Silver appears stronger than gold and if it sells off it may be more of a sideways lull rather than deep dive. 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 COT gold chart is provided by COT Price Charts and annotated by Keystone.

Note Added 8:31 AM EST: Gold 1575. Silver 17.78. 

Note Added 7:10 PM EST: Gold 1580. Silver 17.78.