Strange Times for Gold, in the Shadows of Bitcoin

For millennia, Gold has been the precious metal of choice for Kings and Queens, especially for their royal crowns and jewelry. Gold has always been the first choice for investors following this lead but, just lately, gold’s crown has begun to slip.

It is being pushed from two directions. Normally, at this stage in the economic cycle, investors are looking to gold as a hedge against the falling stock markets after long, sustained rally we have seen. Unfortunately for gold and silver, this year has also seen the rise (and rise) of cryptocurrencies as alternative investments.

“Cryptos” have been making all the headlines, with spectacular growth rates and incredible returns. Gold and silver have been confined to fairly tame growth rates by comparison – or have they?

Gold is up 8.79% up from a year ago according to FRED – The Federal Reserve Bank Of St. Louis. Given the average return from savings accounts is currently running at less than half a percent. surely, anyone would be satisfied with such a return.

Normally, yes of course but this new kid on the block is making all other investments look tame. With Bitcoin hits the $10,000, gold and silver are being overlooked. This is, in our opinion, a huge mistake – let us explain why.

On our daily chart above, we have plotted the 21-day EMA (blue line), the 55-day SMA (green line), and the 100-day SMA (orange line). All of these moving average indicators are acknowledged to be major areas of support and resistance, depending on which way the market is moving. The idea is, that when a price is moving upwards, it should clear these lines of “resistance” in order to continue its rise. Conversely, when a price is moving downwards, it needs to clear the lines of “support” before it can fall further. The 21-day EMA, 55-day SMA, and the 100-day SMA, all act as strong support – and resistance – areas, in both upward (“bull”) and downward (“bear”) markets.

In July, Gold started to rise steadily, until the beginning of September, when it began to slip back. The chart shows the price fell to the level of the 100-day SMA, towards the end of September. You can see that although the price went as low as $1,260, on 6th October, the support of the 100-day SMA held and it never closed below this level.

The gold price continued to rise, and reached the peak of the next small rally, on 13 October, at $1,303. You will notice, although it went above the 55-day SMA level – it never actually cleared it – and then dropped back again.

The gold price then fell to new lows. These hovered up and down, above and below the 100-day SMA – but never closed above or below this level – until last week.

It has since retested the 55-day SMA, as a resistance level, and is trying to clear this at the time of writing.

What is fascinating, is that we are seeing the merging of all three averages at the same time. This is combined with a strong rise in the ADX (blue line on the middle section of the chart) since mid-November. This possible, positive trend, is confirmed by the mid-November divergence indicator ( blue dot on the bottom section) along with the positive, gradual increase in the sigma wave indicator since the end of October showed a divergence (red dot).

We believe that if gold can clear $1,300, properly, over the next few days, it will confirm a strong new rally upwards. This will see it clear of all the resistance indicators, and allow it to rise to the kind of levels we feel it should be at.

As Bitcoin is likely to retrace and fall back from its $10,000 high – even if, only temporarily – gold may well pick up the slack from investors who are reticent to commit further funds to the untried, and untested new cryptocurrency.

It would be foolish to dismiss gold and silver simply because there is another new flavor around.

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