Chart of the Week - Gold

Each week will be providing us a chart of the week as analyzed by a member of their team. We hope that you enjoy and learn from this new feature.


 As we wind down the month of July, it should be noted that the trading ranges over the last two months have grown more and more narrow. In June, Gold prices traded within May’s range and thus far in July, Gold prices have traded within June’s range. This type of price action is fairly normal this time of year in the precious Metals, but traders are trying to figure out what will drive prices out of the narrowing range.

Last week’s chop in the Gold market caught me by surprise, I must admit. The US Dollar spent most of the week heading lower, and many of the major markets looked very strong, especially commodities. The Grain and Crude Oil futures reminded me of charts that we traded during the QE days. Yet, precious metals were nothing more than lackluster.

We heard news from Ben Bernanke that led traders to believe that despite no imminent plans of easing from the FED, that there was still hope of participation coming soon. Traders speculated that perhaps we would hear about the possibility  of additional asset purchases or maybe even a reduction of interest rates on bank reserves held at the FED. Additionally, there was the chance that last week’s LIBOR Scandal could have produced “flight to safety” buying. But Gold still maintained an unbiased trade.

As we enter this week on a sour note across the board, I will lean on technical trading. Fundamental data over the last several weeks that was convincing for other major markets could not help Gold produce a directional move. This is why I will look to the daily chart for clues.

The chart above is a daily chart of August Gold Futures. The first point of interest is today’s low in Gold. The red arrow on the chart shows the convergence of two major trendlines, which stopped sellers in their tracks. It will be important in this week’s trade for Gold to hold this line in the sand. Technically, a failure here would suggest a retest of the May lows around $1530, and below that price, there would likely be very heavy selling pressure. If the market can hold today’s  low, I believe the first target to the upside would be the 50day moving average (green line), then an even price of $1600. Closes above $1600 would be a very welcome sign for Gold Bugs, but this will be no easy task against a very strong US Currency to begin the week.

Good luck this week in the markets. And please feel free to call or email my office. As a Senior Market Strategist with Long Leaf Trading, I advise customers in the futures markets and welcome any input from fellow traders. I can be reached toll free at (888) 272-6926 or by email at [email protected]

Thank you for your interest,

Brian Booth

Senior Market Strategist

[email protected]


10 thoughts on “Chart of the Week - Gold

  1. Thank you for all of the replies.

    I think what stands out here is the fact that traders are now preparing to take a side in the Gold Market in preparation for a break out of the three month, narrowing range.

    It shuld come as no surprise that I side with LA Ronnie on this one. I have been tracking the support on the Euro and the timing of a move from the FED would be perfect if something were to be announced or introduced before we are too close to the election. I think anything with the letter QE would be laughed at, but the language that Ben Bernanke used at his testimony had traders thinking that there may be something new in the cards that the FED will utilize and take credit for "stimulating" the economy.

    We should know very shortly.

  2. Hi Andy,if and i stress if there is free market and gold standard all that mess woud n´t be possible.Unfortunatelly we have planned socialistic economy,barbarously wasteful,wicked and inefficient gold willcome back with vengence.This bull even didn´t start properly.I´m taking bet with you-IN ONE YEAF FROM NOW GOLD AT LEAST DOUBLES. Martin

  3. Two questions come to mind.

    1. Long term rates are pretty much set by the market. The FED's TWIST operations notwithstanding, (buying $267 billion of long term notes in a market that trades $550 billion per day) rates have been falling for years, primarily because the markets as a whole do not believe inflation is much of a threat. If inflation is not much of a threat then why should gold go up? Hype?

    The ten year note interest rate is at an all-time low, and the 30 year finally caught up with it. Long term rates at all-time lows does not imply much in the way of inflation. How about Deflation?

    2. The effectiveness of what the FED is doing. I cannot really belive anyone still thinks that expanding the FED's balance sheet has had any positive impact on the economy. The money just sits there, and the same is happening for money everywhere. The world is taking Shakespeare to heart. Almost everyone who needs to borrow cannot, and those that can borrow don't want to.

    Gold had a very nice run from $250 to $1920 but I think the bull market is over. Unless someone can convince me how the entire world has gotten it wrong with respect to future inflation and we suddenly start borrowing and spending like mad.


  4. Dear fellow investors,regarding PM don´t cry, buy.In this area the technicals are less reliable,rather prparation of fleecing weak harts.Martin

  5. A few things to ponder.
    If you hit the "max" on the INO euro chart, you will see that 1.20 is major, major support. We are near that now. What would cause that to reverse? That would be a stimulus announced by the fed on 7/31 which weakens the $usd and, by default, strengthens the euro as the euro is about 57% of the dollar index.

    Bernake cannot wait til Sept to stimulate as it would make him look too "political" and a collapsing Europe can be used to justify a move in some form or another as it has a negative effect on our GDP. Thus he could rescue the euro from futher decline and stimulate our economy at the same time. A "two fer".

    Who would want to short a market before the 31st in light of the current S&P trading pattern? The mid range close on the S&P today cannot be agnored. Add a 20 day EMA to any S&P chart and you will note we've make 3 higher highs and 3 higher lows (if todays low is not breached) since coming off the bottom. In each of the little selloffs, the market has dipped slightly below the 20 day EMA -just as it did today- and then rallied to make a higher high in about a week.
    It is exactly a week to the FOMC decision. As Brian eluded, this is "put up or shutup" time for gold and silver.

    Hope this helps.

  6. Lest all of you forget this is a period know as the summer doldrums. IMHO the chart of gold does not suggest a $1375 price as the action in the metal show accumulation any time it dips below $1560 and if Gold was going to those levels surely it would have sold off by now. The $1375 callers are just as wrong and irritating as the $2500 callers although it appears that there are at least double of the former vs the latter these days. Based on the DXY price of 83.49 gold has been at different levels 3 separate times over just the last 5 years; the DXY has hit this level. Back in April 07 when gold was trading just under $700 , April 09 as gold traded around $1000 and today while gold trades @ $1576. The point being the DXY may correlate with moves on a specific day due to panic in gold but it does not have a direct correlation with the definitive price. Further more, back in 2005-06 the Dollar and Gold rose together so that is not out of the question and it did that long before the "QExx" baloney appeared on the scene. I think it is more likely that the Dollar is the crowded trade even while the distraction of the Euro keeps the Dollar buoyant the problems we have here are much larger and equally unsolvable. We don't have 17 countries bickering over how to fix the problem like Europe instead we have the corrupt 2 headed 1 party system that can't even begin to address anything due to lobbyists and rhetoric on both sides. Add to this IMHO the UST market which I do not believe is a safety trade as at today's rates with inflation and taxes you would fare just as well holding the $s in your home safe , instead IMHO the derivatives markets are driving the bond yields and essentially the UST market is imploding due to unsustainable low rates that is being hailed as a safe haven. You don't have to believe me just take a simple look around and see how many are long the dollar vs short the dollar? Just about everywhere you read it says the dollar is going higher. The current environment for dollar bullishness reminds me of the peak of the housing bubble ...Just sayin'

  7. That chart is really ugly. Gold has been in a bull market for 11 years and is giving up the ghost. Fundamentals mean nothing because nobody can predict the future.

    Am I supposed to believe that gold is going to go strait up for 20 years? Please.

    I was a major gold follower for many years but all the hype never turned into anything. For one, every time there is a financial crisis gold is the worst thing to be in. The list goes on, no hyperinflation, no comex default, no currency backing ect. I hope you all can see the trend on this... it was only a pump and dump from the beginning.

  8. Thanks for the chart, but it does not seem convinceing chart.

    This is only my view.

    Thanks again

  9. Building a flag. The breakup would require a strengthening of the EUR/CHF/GBP/AUD. The breakdown would assume the opposite. What will happen?

  10. Looking more like QE4 should step in to print more dollars,
    GOLD is setting up for 1375. soon, as the RISK-ON trade is losing again this week.

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