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The gold technical playbook

Commentaries & Views

Perfection is not attainable, but if we chase perfection, we can catch excellence ~ Vince Lombardi

After 20 years of trading futures and commodities, one characteristic that separates those that are successful versus those that fail is that they have an underlying process and a written plan to execute. During Vince Lombardi’s five years with the Giants, he helped lead the Giants to five winning seasons and the league championship in 1956. He then accepted the head coaching position with the Green Bay Packers turning them into the most successful franchise in the 1960’s, leading them to five NFL Championships, including victories in Super Bowl I and II. That solidified himself as the greatest football coach in history. Remember, you are the Coach of your trading account, you call the shots, decide what assets are being put into play, what assets are benched and who is getting cut from the team. 
  
Looking into my playbook, it often starts with a fundamental belief based on facts, and for the case of gold, you have to look at the Weekly Picture and simply put investment demand remains strong as evidence by holdings of gold back ETFs which reached a new all-time high this week. The Federal Reserve now has the largest balance sheet of all central banks and “real” interest rate yields are testing all-time historic lows. These are facts, not opinions. Once you get the facts straight, you apply them to the underlying trend, I often use a weekly chart to identify the long-term trend as shown below. 

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The Weekly Picture

The recent gold trend has retested the 2012 highs of $1800/oz and is set to target the all-time high of $1920.70 made in 2011. While the price action in gold remains in a tight range formed over the past three months, supported by the washout in April, we expect the inverted Head and Shoulders pattern to continue to support the upward trajectory leading us to believe that a $2,000/oz. price objective should be met in the second half of 2020.  

The Daily Picture


Remember that technical analysis is an art form, and as a road map with turn by turn instructions, we can often use this map to anticipate “risk ranges” for ideal buy and sell levels. Since the decisive breakout on April 6, completing the large head and shoulders pattern coincided with a golden cross. We now believe the 50 DMA (day moving average) has come in as the new place to add to core positions on corrections.

What is a golden cross?

If you are not familiar with this term, the golden cross is a technical chart pattern indicating a significant rally potential. It appears on a chart when a 50-day moving average crosses above the 200-day moving average. The golden cross can be contrasted with a death cross, indicating a bearish price movement. 

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.