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Gold slowed - but likely higher to go

Commentaries & Views

So far, so good for those aboard the gold train. As we have noted many times in the past, traders are prone to taking profit prior to obvious resistance areas; that phenomenon seems to have transpired again as the gold price turned around just $10, shy of the $1800 mark. Price is likely exhaling before a true test of the $1800-10 level, in this trader’s opinion. At worst, bulls wasn’t the yellow rectangle to hold up as support; its lower boundary is $1710. At best? Price rips through $1810 on the way to $1850 in a hurry. Below is an update of the familiar weekly gold chart.

Special attention to the gold/silver ratio is merited here. As we had pointed out, the ratio was on a path for a collision with a major confluence zone of support/resistance; that weekly chart is updated below. As it stands, the prior upward-sloping trendline seems to be morphing into resistance, along with the 50-week moving average. Stochastic RSI also looks like it wants to embed into oversold territory, but it could be due for a short-term bounce while the ratio itself puts in another lower high. These conditions (although they may yet take some time to firm up) favor an acceleration to the downside.

As we have suggested, gold miners- on aggregate, like to follow silver’s path. Another update on the weekly chart of the 2x leveraged Canadian gold mining ETF ticker HGU. Although the entire sector would likely consolidate with gold if it should fall to $1710, the open gap still remains the longer-term target for the brave who can stomach the volatility that is certain to come; it is no coincidence that momentum in miners and the gold/silver ratio are currently at exact opposite poles.

Thanks and have a great week,

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.