Charts Suggest Constructive Outlook for Gold Prices in 2019
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(Kitco News) - The near-term and longer-term technical chart postures for the gold market have become more bullish during the last quarter of 2018, to suggest the yellow metal’s price will continue to trend sideways to higher at least into the first quarter of the new year.
The daily bar chart for nearby February Comex gold futures shows prices have been trending higher since mid-August and in December hit a five-month high. The near-term technical posture for the gold market suggests sideways-to-higher price action at least into the end of this year—and until there is a bearish near-term technical signal to suggest the price uptrend is ending.
The weekly continuation chart for nearby Comex gold futures reveals a fledgling longer-term price uptrend is in place from the 2018 low of $1,161.40. The next upside technical objective for the gold bulls is pushing prices above psychological resistance at $1,300.00. A drop in prices below $1,195.00 would begin to dent bullish technical enthusiasm and would suggest a choppy and sideways trading range for much of the first half of 2019.
The longer-term monthly continuation chart for nearby Comex gold futures shows price action has been choppy and sideways for the past couple years. This longer-term chart also suggests that a gold market rally in 2019 could be capped by stiff chart resistance at the $1,375.00 area.
Why value technical analysis?
I was fortunate early in my markets career to be able to work right on the futures trading floors in Chicago, New York and at exchanges around the world. The first thing I noticed was that virtually all of the veteran, successful floor traders had one thing in common: they all employed some form of technical analysis as part of their trading strategies. A veteran floor trader once told me: “Price charts reflect all of the known supply and demand fundamentals in a market, including any and all trader expectations for future supply and demand prospects.” He continued: “If a trader were to try to keep up with all of the known supply and demand fundamentals in a market, such would be a full-time job and still would not provide the trader with any significant edge over the professional traders who likely have already traded upon those fundamentals and already factored them into the market’s price structure. That’s why we study charts.”
Crude Oil a Potential Fly in Ointment for Metals Market Bulls
There is one important caveat that could throw a monkey wrench into the constructive technical outlook for gold. If crude oil prices continue to trend lower in the new year, such would be a very heavy weight on most raw commodity markets and their ability to sustain any price uptrend. Crude oil is arguably the leader of the raw commodity sector. Also, the big speculative “fund” managers who place big bets in futures markets are likely going to stay away from the long side of raw commodities markets as long as sector leader crude oil remains in a price downtrend.