Gold hits $1362 in Overnight Trading
The long term daily chart above highlights two potential falling (slightly) resistance lines from the peaks of the last six years. These lines are represented in black and red. Of particular note is how gold has reacted to these lines in the last few weeks – honoring both to the tick. This trading action is more evident on the 4 hr chart (below).
The trading community is watching alertly for a break of this $1362 level, and especially the $1395-$1400 level, which is the 38.1% Fibonacci retracement from the 2011 peak to the 2015 low. If gold breaks above each of these levels there is blue sky above for a move to at least $1480.
The palladium price broke up from its first test of resistance (blue trend line) and is now in the process of testing its second resistance line (red trend line). This action comes on the heels of a successful test of the 61.8% Fibonacci retracement from the August lows to the March peak, as shown in the chart below.
I would also add that the chart appeared to me to be forming a bear flag (a near term pull back) before resuming its downtrend. This flag broke up this morning (very rare), negating the likelihood of that move.
The key price level is $1460. A move above resistance at $1460 should usher in a retest of all-time highs.
Gold looks bullish; Platinum, not so much
Here is a quick snapshot of the metals sector. The silver chart above is constructive, as silver broke out of a falling wedge and confirmed the bullish action in gold. It also successfully hit its initial target of $15.15-$15.20. The support levels to watch now are $14.30-$14.50, where silver may retest falling wedge support (formerly resistance) and the trend line from the August lows. A break above $15.20 should target a move to $16.20.
Gold remains in a solid uptrend. The three month bull flag consolidation and subsequent breakout in gold from the August low to the February peak suggests a measured move to $1480 if/when gold breaks through long term overhead resistance ~$1360-65. On the downside, $1280-$1290 needs to hold to prevent a breakdown.
The platinum chart is ugly. Platinum simply has no momentum and must fight through a series of falling trend lines to show any sign of life. Until platinum breaks $1000/oz, it will just be trend-less and choppy, and if $755 fails to hold on the downside – look out below.
The palladium chart is attempting a third retest of resistance (prior support). If it can manage to break through above that resistance line, it would send a very bullish signal. Personally, the action from the low to this retest looks me to be a bear flag with further downside to come.
Lastly, copper is at a VERY critical juncture here testing long term support. The chart above is the 30-yr log chart, while the chart below is the 3-yr arithmetic chart.
Copper tends to be a leading indicator and indicative of global growth prospects. Where the copper price moves from here will send a key signal.
Gold retested $1350 in overnight trading, extending this current move more than $84 in the last couple of months. The chart above is admittedly busier than I generally like, but so much is happening technically with the gold price.
Gold successfully retested falling support from the 2011 peak (red line) at $1180 in late-2018. This coincided with a successful retest of rising support from the 2015 low. Gold is now meeting resistance from prior peaks between 1350-1370 during every attempt over the last 6 years to break out.
It would seem very plausible that gold could make one final retest at the $1280 level where two channel support lines converge with arc support and the 200 day moving average. This would likely wash out all new gold bulls.
The gold chart is very bullish and could easily break through six years of resistance within the next few months. Conversely, a break of $1280, while lower probability in my estimation, would do significant technical damage. Either way, up or down, the remainder of the year should reignite gold volatility and define the prevailing trend for years to come.
The precious metals sector has continued the momentum it closed with in May. Gold and silver, in particular have been surging this first trading day in June. Let’s take a look at the technicals.
Gold has moved from a bottom at 1167 last July to a peak at 1350 in February. Beginning in February, volatility began narrowing and gold has been mired in a falling wedge pattern. According to Bulkowski (2010), 92% of falling wedge patterns break to the upside, and of those that break, 90% reach the upside target which is measured as the distance from the breakout move to peak, added to the recent breakout. I see the original break as $1238, so in this case, that would set an upside objective at $1400-$1420.
Furthermore, the fact that gold did not retest the support line at ~$1250 speaks to the strength of the bulls here, along with the positive RSI divergence (bottom indicator). Probabilities favor the bulls here.
Silver has been the laggard, as the gold:silver ratio has hit 90 – its highest level since October 2008. I real bull market should see this ratio decline precipitously with silver outperforming gold.
While gold broke its falling wedge pattern on Friday, silver broke this pattern this morning and is now confirming the gold breakout. Technically, this move could push silver to the $16 level.
During this past week ending May 31st, 2019, oil sold off sharply, closing the week down almost $6 to $53.37, while gold rallied to close the week at $1305.50. I like to monitor the price of oil in gold terms, and to do that I use 100 barrels of oil as the numerator and the price of one ounce of gold as the denominator.
This ratio has been in a downtrend channel for a decade, with a countertrend move beginning in 2016 and failing recently during the oil sell-off last fall, which led to the breakdown of the blue channel. Oil has since tried to retest that support line through the first part of this year, but failed the retest last week. This failure is bearish, meaning that it indicates a lower ratio going forward, which should be strong for gold and weak for oil.
Following weeks of low volatility, where the CBOE Gold Volatility Index fell to a decade low of 8.75, gold rallied $15 per ounce today to close at $1284. Simultaneously, the US dollar broke above heavy resistance (briefly) at 98. As the dollar goes, so go the metals.
Gold has been forming a long, rounded bottom since 2013, and the chart looks constructive. The bull case for gold technically is that the price has remained above the 200 day moving average for the entirety of 2019, and the 200 DMA is now turning up. Gold also pushed into overbought territory on the Relative Strength Index (RSI) earlier this year, and as not oversold, which indicates that gold still has positive momentum.
The bear case is that gold has struggled to push through the 38% Fibonacci retracement from the 2011 highs to the 2015 lows, and remains stuck in a multi-year triangle. Silver has also failed to confirm, as demonstrated in the chart below. Silver’s weakness seems coupled to the base metals sector, which has sold off as part of a global slowdown. Silver remains below its 200 day moving average, and while it fetched a bid today at trend line support, it still has some work to to do break out of the downward channel.
Charts Made with Optuma Software
The future for metals prices depends on the dollar index. A definitive breakthrough above 98 will likely put a ceiling on any intermediate rally.
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