Gold Weekly Chart; Gold Price Hits Record High Above 1900; Overbot; Rising Wedge; Negative Divergence Developing; Upper Band Violation; Price Extended

During last week, the euro strengthens after the ECB meeting running up through 1.15, then 1.16, now taking out 1.17. The dollar collapses catapulting gold and silver to the stratosphere. The Fed meeting is on tap this week and traders expect more dovishness which supports the weak dollar theme. The US dollar drops to two year lows. Gold pops to 1934 (1970 COMEX). Gold bulls cheer the rally and rightfully so. Look at the move from Summer 2018 to present; from 1180 to 1940 a 760 point move or +64.4% in only 2 years.

Recapping from a few days ago, the gold daily chart was in full negative divergence so a smackdown was needed, and it occurs for a few days but the move lower was nothing to right home about. The gold weekly chart was developing negative divergence, and that continues above, but the MACD line remained long and strong so you knew gold would come up again for another higher high on the weekly basis. The 1820-1830 area seemed like a good target since Keystone's 80/20 Rule says 8's lead to 2's so the breach of 1780 hinted that 1820+ was coming.

Interestingly, the breach of 1800 hints that 2200 is coming in the future and you may as well call that 2220-2230. It likely will not be right away. When the hyperinflation parade hits, say 2 to 4 years out, currently the US and globe remains in this deflationary/disinflationary period, gold will skyrocket as will other asset classes. Gold will be 5K and more, the Dow will be at 50K running higher. The problem then will be that the dollar will be tissue paper. Gold breaches 1880 so 1920 is on the way which occurs. The 1980 level is key since that would open the door to 2020+.

The move last week is impressive that big ole white candlestick gaining +5%. Silver exploded +16% higher last week. The exact highs in gold are occurring at the exact lows with the dollar with the dixie, DXY or USD, at 93.83 losing the 94 level. That gets your attention since a breakdown in the dollar is in play. For Keystone's 80/20 Rule, 2's lead to 8's on the way down so a breach of 94.20 opens the door to 93.80 which is occurring now.

For the gold weekly chart, the green star shows the current price, call it 1940. The upper band is violated so the middle band at 1720, and rising, is on the table as well as the lower band at 1536. If you bring up a gold daily chart, you can see that the full price candlesticks are completely above the upper band which is a rarity; it means that the enthusiasm and euphoria for gold is off the charts. 

The RSI is coming off overbot levels during the last year and only a hair from overbot now, it will be today. The stochastics are overbot agreeable to a pullback on the weekly basis. Gold has momentum now so it may take a couple weeks or so of choppiness to turn it around. The rising wedge is ominous since the collapses from such patterns can be epic. Gold is such an emotional trade for most folks that it almost seems inevitable to happen going forward. It surely will be a sight if gold tumbles 200 or 300 bucks, or more, after this spectacular upside pop and rally that continues currently. The US dollar is down to 93.80 now, check that, 93.79. Gold bulls cheer.

The red lines show the negative divergence developing. All the chart indicators are in negative divergence (wanting a multi-week pullback) except for the MACD line that remains long and strong so another matching or higher high in price, on the weekly basis, is needed. Gold may be gunning for the apex of the rising wedge pattern which would be an historic set-up. The RSI and money flow are trying to squeeze out some more juice but both have to take out the highs from February to be meaningful and create more price strength. Thus, watch the MACD line over the next couple weeks since it will identify the top in gold on the weekly basis. It will be anytime over the coming couple-few weeks, or sooner.

By sooner, you have to maintain respect for the price action in February/March during the record stock market crash. At the top months ago, the dollar weakened providing the last upside breath to stocks. Interestingly, the dollar then spiked straight vertical and not a little but a lot. This was on the fear about the pandemic and the global economy going into freefall. Many investors feel sanguine nowadays but it is likely misplaced optimism. The economic data would be expected to weaken going forward. The US may want workers to return to jobs but many of those jobs are toast. Global investors will seek the dollar at the next whiff of a global slowdown and trouble, so stay on guard for a repeat of earlier this year where the dollar skyrockets, stocks collapse, and gold collapses with stocks. In a downturn in stocks people are trying to raise money and sometimes they are selling gold to raise cash.

The long term chart shows the textbook inverted head and shoulders (H&S) pattern with head at 1050 and neckline at 1370 (difference of 320). There are two right shoulders. Price breaks above the neck so the 1690 level is targeted (1370+320) and achieved. The H&S is not textbook from the standpoint that a back test did not occur after the breakout above the neckline. Typically, price will come back down to back kiss the neck and then bounce and start the big rally higher. Gold stumbles around 1700-1750 for a while and then breaks out higher. The move in gold is parabolic for the last couple years as the Federal Reserve and other central bankers sell out souls.

Another interesting thing currently is that some investors are taking physical delivery of the yellow metal. This forces buying on the open market which fuels higher prices. So there are a lot of moving parts to it all. The Fed meeting is key in a couple days and traders may try to keep the dollar weak and stocks elevated into the press conference on Wednesday. Stocks are usually bullish into Fed meetings 80% of the time so the stock market bears have their work cut out for them.

The gold weekly chart says the top on the weekly chart continues approaching but it is not here yet. The negative divergence in the MACD line will tell you when the top is in, say a couple weeks out, price will probably chop for a while, and then a multi-week downturn for gold would be expected. Its a momo trade now. Again, be cautious, because stocks need to pullback hard and gold may do the same right away. If you enjoyed the big gold rally of course take money off the table. Keystone scalped GLD short for a flat trade days ago but is not in any gold trades now. The top in gold will be an attractive opportunity to short GLD or go long GLL, as soon as the MACD goes neggie d. GLD will likely take out its record high from 2011 today.

Gold 1936. The US dollar tries to stabilize at 93.80 for the last 90 minutes. Euro 1.1727. The euro runs higher. VIX 26.06. S&P futures +19. 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.