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Gold is staging a
breakout of a powerful technical pattern that will bring $1500/oz. into
reach. Buying pressure has been building for physical gold. Price action is
reflecting stronger bullish sentiment and a continuation of the long term
bull trend, which dates back to 2009. Technical indicators show that gold is
now poised for another strong move to the upside.
We know that gold trades
differently than other commodities and differently than stocks. Some
successful investors, such as Warren Buffet, steer clear of gold because it�’s
value cannot be easily calculated by some discounted cash flow or other
quantitative method. The price of gold reflects investor sentiment and
investor expectations for future economic conditions. The price of gold
reflects inflation expectations, future global economic conditions and
political tensions. When investors get nervous, gold provides reliable
refuge.
Technical analysis is
very effective for making predictions for the price of gold. That�’s
because investor sentiment is the main driver in the gold market. Supply and
demand are slower moving operators on the price of gold. Investor sentiment
on gold can be mercurial at times, but the patterns of investor behavior in
the gold market are well established. Patterns repeat, which is why technical
analysis works.
Price action in spot gold
has produced a bullish cup-and-handle pattern. This is a powerful bullish
chart pattern that dates back to November 2013. The cup-and-handle pattern is
formed when price action carves out a gradual, deep cup, returning to the �“lip�” trend line, followed by sideways
to slightly declining �“handle�” portion. The depth of the cup
portion defines the measured move. Breakout is a close above the lip trend
line as some time after the handle is formed. A spike in volume at breakout
confirms the validity of the pattern.
We can see the cup-and-
handle pattern is well defined for COMEX spot gold on the daily basis chart.
The lip trend line is 1353. The breakout, accompanied by a spike in volume,
occurred on March 12th. The measured move is 164, which brings a
target price of 1517 for the pattern.
After breakout, price
action continued to climb, until today. During the overnight and early
morning hours, gold dropped back down to the trend line. If gold closes below
the trend line today, then the pattern will have failed. It is not uncommon,
however, for price to find support at the trend line, then resume in breakout
fashion.
We will be watching gold
closely over the next several trading sessions. We are long COMEX gold in our
Model Conservative Portfolio. We have been long gold for a while now. We
expect gold to move higher from here.
Responsible citizens and
prudent investors protect themselves and their wealth against the ambitions
of over-reaching government authority and debasement of the currency by owning
gold. Gold is honest money. Investors from around the world benefit from
timely market analysis on gold and silver and portfolio recommendations
contained in The Gold Speculator investment newsletter, which is based on the
principles of free markets, private property, sound money and Austrian School
economics.
The question for you to
consider is how are you going to protect yourself from the vagaries of the
fiat money and economic uncertainty? We publish The Gold Speculator to
help people make better decisions about their money. Our Model Conservative
Portfolio has outperformed the DJIA and the S&P 500 by more than 3:1 over
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editor@thegoldspeculatorllc.com
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