(Kitco News) - For several years back in the 1980s and early 1990s I worked on the futures trading floors in Chicago, New York and Europe. One common thread that virtually all the floor traders had in common was that they employed some form of chart reading (technical analysis) to guide them in their trading decisions. More than one veteran trader told me that a price chart reflects all the known and the expected market fundamentals in a market at the present time. That’s a powerful statement and it’s also why traders and investors should employ some form of technical analysis in the trading and investing.
It’s important to keep in mind that chart analysis and trading can be divided into three timeframes: short-term, medium term and long term. The shorter-term traders are in and out of the markets often and would probably benefit from using mostly intra-day charts, such as hourly or even minute charts. Medium-term traders who trade less may stay in a market for several days or a few weeks are likely more inclined to employ daily bar charts in their analysis.
Longer-term traders/investors who have a trading horizon of months or even years are better suited to more closely examine longer-term weekly and monthly charts. However, it’s actually prudent for traders of all trading timeframes to examine the shorter-term, medium-term and longer-term charts. History shows that market prices, when trending, tend to gravitate toward historical highs (in an uptrend) and historical lows (in a downtrend).
The weekly continuation chart for nearby gold futures shows that prices have been trending up since October. The overall posture of the weekly gold chart favors the bullish camp. It would take a move in nearby gold futures prices below strong technical support at the 2022 low of $1,619.10 to give the bears longer-term technical power to suggest a steeper and longer-lasting price downtrend would develop. The weekly chart also suggests that in 2023 prices will trend sideways to higher in a range between $1,800 and $1,950.
The monthly continuation chart for nearby Comex gold futures is also longer-term bullish. Prices have been trending higher, in choppy fashion, on the monthly chart since 2015. Since the 2020 record high was posted, price action on the monthly chart has been sideways, choppy and consolidative at still historically high levels, suggesting the bulls may be storing up energy for another move higher in the coming months or years, including a new record high in the next few years.
Combined, the weekly and the monthly charts for gold futures give a longer-term bullish posture for the yellow metal. It’s my bias that within five years gold prices will hit new record highs.
