Gold is a universal favorite nowadays.It used to be only the stock market bears that touted gold but now everybody and his bro are in on the yellow metal. Reverend Brown took last week's collection basket to the broker in town, next to the laundromat, and bot GLD. Strategists with SPX price targets at 3300, 3400 and higher are telling investors to buy gold at the same time. Of course the ladies love gold as well preferring rings and chains instead of coins and bars.
Gold has been on a wild rally run since the 2018 bottom. 1200 to 1800 is a 6 hundo gain, +50%, in less than 2 years time. No gold bull can complain about that run if they held on the whole time. However, alas, like life, there is a time to let go. Gold is a very emotional trade and always tied to headlines so of course any event such as a worsening coronavirus pandemic, terrorism, war, etc..., can pop gold out of the blue but the charts are long in the tooth.
Ready for some mumbo jumbo? On the gold weekly chart, the red rising wedge is ominous since the collapses from these patterns are quite dramatic. Stochastics are overbot agreeable to a pullback and the RSI is coming off overbot levels for the last year. The red liens show universal neggie d across all chart indicators. It's cooked. Stick a fork in it. Last week a doji candlestick prints which typically signals a trend change.
The ADX remains elevated on the weekly chart so the rally higher for these many weeks is considered a strong trend higher on the weekly basis but you can see the ADX starting to slump away. The Aroon green line is pegged at 100 maximum gold bullishness and nowhere to go but down.
There is really no technical reason for gold to move up any higher. The money flow has near-term mojo which may help to buoy price a few more days. Gold is up 4 or 5 bucks this Monday morning. It is likely prudent to short the gold rallies going forward. Note that for the last few weeks of gold buying, none of the weekly volumes could overtake the sell candle from early June when gold bottomed at 1670-1675. The upper band is violated so the middle band at 1689, and rising, is on the table. The lower band at 1525, and rising, is also on the table. Price is extended above the moving averages requiring a mean reversion lower. All the above is bear talk.
On the gold daily chart, the red rising wedge over the last few months grabs your attention. The collapses can be fast, sharp and nasty; gold could be in the 1450 to 1580 range in a heartbeat if that pattern fails. Stoch's are overbot agreeable to a pullback. The red liens show universal negative divergence across all indicators. Gold is cooked on both the daily and weekly charts; that is bad. The ADX is in the basement so the daily chart indicates that gold is not in a strong uptrend. The Aroon green line is way overbot with nowhere to go but down. Price is extended requiring a mean reversion lower. The upper band is violated so the middle band at 1751 is on the table as well as the lower band at 1689. The chart is just as bearish as the weekly chart. Note how a confluence may be forming at the 1650-1700 area that is where gold may be heading as the multi-week downturn begins.
As a general statement, you would rather be on the short side of gold over the next couple months rather than the long side. Keystone does not hold a position in gold or derivatives right now but will likely either go long the GLL ETF or short the GLD ETF. GLL is thinly traded. GLD has more liquidity. GLD is at 166.81 in the pre-market. Shorting it here or higher and holding it for a month should work out fine. A pop to 167-168 would be a good place to short from but at this point anything will likely work.
The only thing that can save gold from the start of the multi-week slide is negative news. The disturbing thing about gold is that the long-term monthly chart may be topping out as well so this may be the swan song for gold for many months if not a couple-few years. The monthly chart can be monitored to see how it develops. With all the world drama going on, you would not think this to be the case. Perhaps the world's population loses confidence in all things at some point forward including central banks, stocks, bonds, art, real estate and even gold. After all, the central banks have artificially pumped all asset classes in existence higher and no one truly knows the correct price for any asset these days. This stuff never ends well. 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.
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