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Weak

Is The Gold Move Over?

I have had a number of requests to update my January 3rd special report on gold. Since that report, gold has rallied $150 from the lows that were seen in late December 2013.

On January 3rd, I outlined what I thought was going to happen to Gold (FOREX:XAUUSDO) and I was very happy to see that scenario play out for both our members and myself. Since that date I have seen a number of factors play into the market, the biggest being the events in the Ukraine right now.

One fact I wanted to share with you, which I found surprising and did not know, was the fact that Indian housewives hold 11% of the world's gold. That is more than the reserves of the USA, IMF, Switzerland and Germany put together. Now, there’s a bit of trivia to impress your friend with.

One of the major changes to take place this quarter in the gold market was a new monthly Trade Triangle that kicked in and signaled a major reversal to the upside at $1326.91. This was the first signal in our monthly Trade Triangle since December 18, 2012 at $1672.40 when this indicator signaled a downtrend. These monthly Trade Triangles do not come along that often in gold and when they do you need to pay close attention to them.

Looking at the chart of gold, the two most dominant features I see are the resistance levels around the $1350 area (number 6) and at the long-term trend line (number 9).

1. The monthly and weekly Trade Triangles are positive
2. Previous red monthly Trade Triangle signal
3. Part one of double bottom
4. Part two of double bottom
5. Pivot point
6. Major resistance from previous high $1350
7. Negative divergence on RSI indicator
8. Major Trade Triangle reversal to the upside
9. Major 15-month downtrend line

The potential exists for the gold market to pullback to the $1280 or even the $1260 area from present levels. This is based on a Fibonacci retracement measuring from the highs that were recently seen around the $1352 level and the lows that were seen in the late December around $1200. If given the opportunity, I would like to add/put on new long positions around the $1270 zone.

Another key area to watch for clues will be the RSI and the 50 support line that I've talked about before. If you haven't seen the special lesson on the RSI you can watch it here.

I still believe that gold eventually will trend higher, especially as inflation becomes more and more of a keyword in the media. The immediate outlook for this market I expect will be somewhat choppy and in a defensive mode. Pay close attention to the weekly and daily Trade Triangles, as they will give you a heads up as to where this market is headed.

Don't forget a comment if you'd like to discuss gold and give us your views on the gold market.

Here's to a very successful gold trading year to all our members, traders and friends,
Adam Hewison
President, INO.com
Co-Creator, MarketClub

Comments

  1. Nice analysis by Adam. Thanks for the chart image. Decisive break of RSI will find gold in new bull orbit.

  2. Joe Duray-Bito says:

    The double bottom { 3-4} six months apart is long enough to overcome the RSI {7} for now.

  3. Jeff says:

    Gold is a strong long term investment as long as the worlds wealth keeps getting concentrated in the hands of the 1% to a greater and greater degree.

    This has nothing whatsoever to do with price inflation, of course, which is what happens when the middle class gets money in faster than production levels can rise (simple supply and demand). It does have something to do with monetary expansion (frequently referred to incorrectly as being synonymous with price inflation). It has everything to do with global asset inflation, which is what happens when the number of dollars chasing capital goods goes up with respect to the return (ie. middle class dollars going into consumption) that the capital goods provide. As stock, bond, and real estate return on capital invested go toward zero, gold becomes just as good a store of wealth as anything else out there.

    • Stefan Ohlinger says:

      Gold price will probably improve further during this year I bottomed recently, and demand will raise again.

  4. Frank says:

    All of the news seems to indicate all is well, employment, housing, inflation, Stimulus is declining. Can't get too optimistic, although I'd like to. Course if Putin blows the dollar away like he implied he would, and he knows we don't have the ahem..."intestinal fortitude" to defend ourselves.....

  5. Abbas says:

    Will the price of gold affect the Australia dollar or thecurrency pair Gbp/Aud?

  6. ginny says:

    Hi Adam,

    Just wanted to say thank you for posting this article. Your comments on the monthly trade triangle and it's importance is very good news. I appreciate your analysis and will also take a look at the "How to use..." video on the RSI. I am enjoying my subscription to Marketclub. Thank you.

  7. Mel says:

    Putin is the Russian Bear VS. Obama the Pease Nick

    • Jeff says:

      "Putin is the Russian Bear VS. Obama the Pease Nick"

      I am not quite sure what you are driving for here, but remember that over a million people died in Iraq recently because of the number 14.

      When all the Iraqis back in 2003 came out of the polls marked with purple thumbs and only 14 percent of them (in the middle of a depression worse than 1930 here) voted for the Calvin Coolidge/Herbert Hoover candidates that we wanted installed there, we declared that they were "not ready for democracy" and kept them under military rule until their opinions could be altered.

      Since the invasion, we have seen billionaire celebrities like Giuliani reveling in the "decisiveness" of Putin while ignoring the fact that morgues are receiving new fathers, brothers, and lovers. I think we should all take a few moments to be grateful for the work of peaceniks in the same way we are grateful when policemen catch serial killers and firemen save burning hospitals.

      • ginny says:

        Jeff, I think I am agreeing with you on this one. It would be great if all were "peaceniks," but they aren't. I don't think America needs to get involved with the affairs of Russia and the Ukraine (Russians). How would Americans feel if the Russians decided to tell us what to do. We no longer have the fortitude, money, resources, etc., to continually "nation build." We need to look after our own for a change. We sent a billion dollars to the Ukraine and cut the benefits to our own military. How upside down is that? The "so called leaders" have turned our nation upside down. Time to make a huge change in WA D.C. Wouldn't it be nice if we just concentrated on our boarders and our own people. Call it peaceniks or isolationism. Either way, I for one, am sick of our young and best dying in needless wars. We have enough resources in our country to bring jobs home, begin manufacturing our own products, and sell our energy to the world........if regulations weren't holding us back.

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