Monthly charts show major price development and are crucial in determining the long-term trends. It is slow to change and I update it once the price reaches the important level or makes a breakout or reversal. The last time I updated the monthly chart was last August when the price reached the multi-year trendline resistance.
I had assumed three possible scenarios of price action and the least interesting second scenario of consolidation plan worked. I had set the margins of consolidation within the $1100-1400 range and some readers thought it was too wide, but as you can see now it played out perfectly – the actual range is $1122-1367 for the past period.
The trendline resistance falls lower and lower in the long run and now the price meets it again. That’s why added an updated monthly chart below.
Chart. Gold Monthly: Crossroads
This time we have the same situation as in the past year. Last July the price had tried to push through the black resistance line, but failed and there was hope that in the next month the breakup could be done and we all know what happened next. Last month the price also tried to overcome the barrier but failed. Nevertheless, the hope is still there as always in such situations. This month’s candle tells us that the price first dropped down from the open at $1267 to $1214 low and is now reversing losses and is yet to cover them all.
Here are three new scenarios based on the chart structure. This time I will start with the positive plan, which implies the breakup of the resistance as highlighted by the blue upwards arrow, which points at the 50% Fibonacci retracement level ($1483). I came to this outcome calculating the distance of the price growth from December 2015 ($1046) through July 2016 ($1375) and adding the result ($329) to the previous low established in December 2016 at $1122. The target is set at the $1451 level, which is very close to the above-mentioned Fibonacci level. I added an RSI subchart to bring to your attention that the indicator is above the 50 level and this could support the breakup.
The second scenario again as in the last update plots the time-consuming and patience-trying consolidation. This time I think that the range could be fixed within the $1040-1340 levels between closest extremes.
And the last scenario is the continuation of the downtrend, which is contoured by the black converging trendlines. The red downward arrow points at the area below the psychologically important $1000 mark. The distance of the move from the peak of August 2013 ($1433) down to the bottom of December 2015 ($1046) is equal to $387 (almost the same as in the first scenario). If we subtract it from the top of this April ($1295) then the possible target could be set at the $908 mark and it perfectly fits the support touching point on the chart.
Dear readers, please share your opinion in the vote and comments below. Monthly updates are rare and I would be grateful for your feedback.
INO.com Contributor, Metals
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.