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Gold bulls still enjoying longer-term technical advantage

Kitco News

Editor's Note: 2020 is expected to be another year of significant uncertainty and turmoil. But the question is what asset will emerge the victor when the dust settles from the global trade war, Brexit, recession threats, negative bond yields. It's a showdown of global proportions, so don't miss all our exclusive coverage on how these factors could impact your 2020 investment decisions.

(Kitco News) - The last quarter of 2019 has seen gold prices trending lower from the yearly high of $1,556.20, basis nearby Comex futures, scored in September. The yellow metals bulls should not be too disheartened, even though the shorter-term technical posture for gold is neutral at best, when looking at a daily bar chart. The longer-term monthly and weekly continuation bar charts for nearby Comex gold futures shows prices have been trending higher since the 2015 low (monthly chart) and 2018 low (weekly chart) and this year notched a six-year high. See the longer-term technical support and resistance lines on the charts.

From a longer-term trend perspective, price history dating back over 40 years shows the gold market experienced a price uptrend from 1976 to 1980. A downtrend occurred from 1980 to 1985 (with an upside correction within the downtrend in 1982. From 1985 until 1987, a price uptrend occurred. From 1987 until 1993 a gentle price downtrend occurred. Prices traded sideways from 1993 until 1996 and were in a downtrend form 1996 until 1999. Prices then traded sideways until 2001, and then embarked upon a powerful 10-year uptrend that produced an all-time high of $1,908.60 in 2011. And then from 2011 until 2015 prices trended solidly lower.

Since 2015 gold prices have been trending up, but in choppy fashion. The monthly and weekly gold charts at present are still overall technically bullish. That suggests the outlook for gold in the coming new year is for more of the same—trending sideways to higher in the coming weeks and months, or even longer.

It will take a move in nearby gold futures prices above longer-term technical resistance at the 2019 high of $1,559.80, basis nearby futures, to provide the bulls with fresh longer-term technical strength to suggest a challenge of significantly higher resistance levels that include the all-time high of $1,920.70 scored in 2011. It would take a move in nearby gold futures prices below longer-term chart support at the $1,375.00 level to produce serious longer-term technical damage to then suggest a years-long price downtrend.

From a fundamental perspective, the main reason for gold’s price action favoring the bears and the market languishing in the fourth quarter of 2019 is a generally quiet geopolitical front. One can argue that it is surely quiet on the world news scene, from a markets perspective, when headlines coming out of the U.S. and China regarding their trade war were in the spotlight most of the last half of 2019—yet nothing much at all got accomplished on that matter. Do not expect the year 2020 to be so quiet. There is at least one major news development that everyone knows will impact and likely unsettle the markets next year: the U.S. presidential election. Other possibilities include U.S.-Iran tensions, North Korea’s missile program, and economic/financial problems from several countries that have experienced the same in past years.

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.