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Where Does Gold Go Now?

By:
Charles Thorngren
Published: Apr 23, 2018, 11:59 UTC

Gold has been very quiet over the last couple of months. Since hitting $1,300 during Christmas week, it has been confined to a narrow range of around $1,305 to $1,352. Can it be the beginning of a downtrend?

gold go now

This is despite the “correction” in the stock market, which made a slight dent in the middle of the range but created no lasting damage, or resultant rise, or fall, of note.

The tussle between buyers and sellers is becoming a stalemate. There are signs that all this may be about to change though.

A look at the weekly chart, together with some of our indicators, reveals an interesting picture emerging.

Gold Weekly Chart
Gold Weekly Chart

The basic trend (certainly since the beginning of February 2017, where this chart starts) is upward. This is clear from the 21-day EMA (Exponential moving average – blue line) which, on a weekly chart like this, flattens out the effects of the day-to-day volatility. Even through the range bound period, at 4) and 5) the trend is still upward –  albeit at a slower rate. However, within this range there are no real higher-highs or lower-lows – so gold would seem to be in limbo.

In situations like this, we have a number of indicators, in technical analysis, to help us spot any developments which could alter the way in which gold is behaving. Here, we use a combination of divergence and pulse indicators. The divergence indicator tells us when there is a difference between what we see on the chart i.e. the uptrend, and the way in which the market is actually behaving.

The pulse indicator tells us whether there will be a change in trend, and what the volume and momentum of that change are likely to be. This shows us, not only the direction of the change but gives us an idea of how strong the resulting movement is likely to be.

If we look at the chart, at 1) you will notice a blue dotted line above the candlesticks. You will also notice a similar blue dotted line in the section below it. This is an early warning indicator that the market is about to change direction. In this case, you can see that immediately after the signal, gold dipped for the next five weeks, 2).

As the divergence indicator is a warning, it does not necessarily show an immediate change of direction like this. The indicator fired its latest warning back at the highest-high – in the week of 21st January – but, as we have noted, gold has just been stuck in this 4) to 5) range, ever since.

If we take a look at the divergence indicator, in the middle, and the pulse indicator below, though, we can see a clarification of what is happening with the gold price. Here, it can be shown on the last blue dot, on the grey line, that there is a downtrend in the divergence, at 7).

This is also confirmed by the appearance of the dark green pulses, which are becoming shorter, on the lower chart, at 8) – this too, shows a downtrend. What is really interesting though, is the red dot here, which indicates (after 36 weeks of blue dots – with the exception of one on the week of 26th of November – after which there was a fall, to the lowest point in months – $1,242) a change in trend. This is especially powerful, as it is a weekly pulse signal.

The last two weeks have seen a fall in the price of gold, from $1,355 to $1,328, at the time of writing. If these Indicator signals are correct, it would seem that gold is due for a correction now. If it now closes below the 21-day EMA, it would signal that gold will start to fall back. If it falls lower still – towards the 55-day EMA, and even beyond, to the 100-day EMA, this will confirm a new downtrend.

This is not necessarily bad news, and many will look upon this as a buying opportunity. The stock markets, in general, are still very jittery – and it is 50-50 as to whether they correct again, or they continue their upward momentum. There are no clear signs here, yet, to show the way forward.

We would have expected more of a move in gold as a result of the recent stock market correction – but, with Bitcoin and other cryptocurrencies now taking up the slack of the undecided, and the opportunists, it seems that the gold market has changed from the certainties of the past.

It will need a close eye kept on it during the next couple of weeks to spot whether the recent falls are emerging as a longer-term pattern, or whether they are just another false – or short-term – signal.

Noble Gold specializes in IRAs and 401(k) rollovers through precious metals and cryptocurrencies investments.

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