Best of the Week
Most Popular
1. Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - Nadeem_Walayat
2.Gold Price Focusing on May Cycle Bottom - Jim_Curry
3.Silver, silver, and silver! There’s More Than Silver, People! - P_Radomski_CFA
4.Is the Malaysian Economy a Potemkin Village - Sam_Chee_Kong
5.Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - Troy_Bombardia
6.A Big Stock Market Shock is About to Start - Martin C
7.A Long Term Gold Very Unpopular View - Rambus_Chartology
8.Stock Market “Sell in May and go away” Study When Stocks Are Down YTD - Troy_Bombardia
9.Global Currency RESET Challenge: Ultimate Twist - Jim_Willie_CB
10.The Coming Silver Supply Crunch Is Worse Than You Know - Jeff Clark
Last 7 days
Blackstone, BlackRock or a Public Bank for California’s Money? - 27th May 18
Stock Market Study: How Long After a 10%+ “Small Correction” to Make New Highs? - 27th May 18
Gold, US Stocks and Bonds - 26th May 18
Climate Change Canaries and Our Changing Climate - 26th May 18
Gold Junior Stocks GDXJ ETF Fundamentals - 26th May 18
What to Expect at a Critical Stock Market Point: End of a Wave 2 Rally - 25th May 18
Merlin Passes Top Tips for Buying and Using Premium vs Standard, Theme Parks UK - 25th May 18
Trump “Victories” on Trade are Anything But - 25th May 18
Crude Oil: It’s Here! - 25th May 18
Stock Market Distribution Pattern Revealed - 25th May 18
Stock Market Topping - Everything Looks Rosy at the End of a Trend! - 25th May 18
Trump Puts North Korea Nuclear WAR Back on Track as Plans for Nobel Peace Prize Evaporate - 25th May 18
Insane EU GDPR SCAM Triggers Mass Email Spam Attacks! - 24th May 18
Stock Market Higher Again, but Still No Breakout - 24th May 18
Study: Slowing Global Economic Growth IS NOT Bearish for U.S. Stocks - 24th May 18
What if This Week’s Rally in Gold is Already Over? - 24th May 18
EUR/USD – Reward for Bears - 24th May 18
5 Terrible Trading Mistakes That Rookie Investors Keep Making - 24th May 18
More Clarity for the Short Term for Bitcoin Price - 22nd May 18
Study: A Rising and Strong U.S. Dollar Isn’t Consistently Bearish for the Stock Market - 22nd May 18
Gold, Silver & US Dollar Updates with Review of Latest COTS - 22nd May 18
Upside DOW Stock Market Breakout May Be Just the Beginning - 22nd May 18
5 Reasons Why Forex Trading Is Becoming Such A Big Deal In SA - 22nd May 18
Fibonacci And Elliot Wave Predict Stock Market Breakout Highs - 21st May 18
Stock Market Ideal Cycle Low Near - 21st May 18
5 Effects Of Currency Fluctuations On The Economy - 21st May 18
Financial Conditions are Still too Easy for the Stocks Bull Market to End - 21st May 18
US Stock Market Elliott Wave Predictions for 2018 and Beyond - 20th May 18
Are You Still Fearful of Cryptos? - 20th May 18
US Stocks - Why I am Short-term Bearish, Medium-term Bullish - 20th May 18
Looking for a Turn in Gold Price - 20th May 18
GDX Gold Mining Stock Fundamentals 2018 - 19th May 18
Semiconductor Stock Market Canaries: Chirp, Warble… Soon a Croak and Silence? - 19th May 18
Three Drivers of Gold Price - 18th May 18
Gold Market in First Tertile of 2018 - 18th May 18

Market Oracle FREE Newsletter

Trading Lessons

The Last Time This Happened, Gold Rallied 20%

Commodities / Gold and Silver 2017 Apr 20, 2017 - 10:38 AM GMT

By: HAA

Commodities

John Grandits : With much of the price action in gold driven by sentiment and technical analysis, you should keep an eye on the broader trends, even if you consider yourself a buy-and-hold investor.

Traders use technical analysis to predict future market moves based on recent price action. Most of it sounds complicated, but it really boils down to simple math.


One of the most commonly cited technical indicators is a moving average. Day traders often use moving averages based on very short time frames—sometimes as short as one minute—while longer-term investors refer to 50-day and 200-day moving averages to spot opportunities.  

According to Newton’s First Law of Motion, a body in motion will remain in motion unless acted upon by an outside force. Investments work the same way: once a trend has gained momentum, it tends to continue—be it up, down, or sideways.

This has largely been the case for gold, which kept trending down over the past five years.

But now the trend seems to be reversing: gold is up over 20% since its December 2015 low of $1,050/oz. and over 10% since the beginning of 2017.

That means opportunities to get gold “on the cheap” may be dwindling, as the most recent price hike to $1,275/oz. this week indicates.

But How Can We Be Sure? 

The short answer is, we can’t. But one technical indicator has proved extraordinarily reliable in forecasting larger trend changes. It’s known as the “Golden Cross.”

We see this cross (which has nothing to do with gold itself) when a shorter-term moving average crosses “up” through a longer-term moving average. Longer-term moving averages typically are better predictors of significant trend changes.

The following chart of GLD, a good proxy for the price of gold, contains three simple moving averages, 50-, 100-, and 200-day.

Note that the 50-day crossed up through the 100-day in mid-March, and gold subsequent rallied from $1,200 to $1,275/oz.

With the strong rise this week, gold has moved above its 200-day moving average.

The 50-day average is also getting close to crossing above this critical threshold. If the move materializes, it would form the above-mentioned Golden Cross.

This is a strong, supportive technical indicator for the coming months.

The last time gold crossed above its 200-day moving average, in early 2016, gold went on to rally $230/oz., from $1,130 to $1,360. The Golden Cross occurred a few weeks later.

While past is not prologue, the reasons for owning gold are as strong as ever. Whether it’s mounting tensions with Russia/Syria and North Korea, a US stock market looking more vulnerable to a correction, the Fed attempting to unwind its massive balance sheet and tighten monetary policy, or the upcoming election in France—there are ample catalysts to propel gold higher.

If the Golden Cross fails to materialize and gold consolidates some of the gains from this year, you should view this as a buying opportunity before the next move toward $1,400/oz.

Since December 2015, gold has consistently moved a few steps forward and then taken a step back, making higher lows in the process, a constructive view from a technical standpoint. I recommend you watch gold’s price action closely in the coming months and use the fluctuations to be opportunistic in building your position.

Free Ebook: Investing in Precious Metals 101: How to Buy and Store Physical Gold and Silver

Download Investing in Precious Metals 101 for everything you need to know before buying gold and silver. Learn how to make asset correlation work for you, how to buy metal (plus how much you need), and which type of gold makes for the safest investment. You’ll also get tips for finding a dealer you can trust and discover what professional storage offers that the banking system can’t. It’s the definitive guide for investors new to the precious metals market. Get it now.

© 2017 Copyright Hard Assets Alliance - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable,


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules