Gold's Next Move

By: Donald_W_Dony

Gold has drawn a lot of attention lately with its recent strong upward swing. But where it goes from here is what must subscribers are asking.

Let's look at the driving factors.

About 78% of all the gold mined is used for jewelry and industrial applications. The remaining 22% is used in financial applications.

Gold, when priced in U.S. dollars, tends to move in the opposite direction to the greenback. The current movement appears to be driven by economic concerns more then dollar weakness as the US$'s trend is still upward.

Gold's present upper trend appears motivated by events on the world stage (Trump's escalating trade war with China, weakness in Europe and deteriorating global growth).

Spot gold has posted a new YTD high in August. Our curve fitting models show that the precious metal is at the top of the curve, similar to February 2019 (Chart 1).

Past performance would suggest some degree of retracement. Chart 2 illustrates some of the near-term levels. The support level 2 at $1450 has the greatest probability.

In Chart 3, both gold equity indexes (Dow Jones US Gold Mining Index and the iShares S&P/TSX Global Gold Index) have broken out and reached new 2-year highs.

Technically, both are now overbought and are susceptible to profit taking and a retracement.

Bottom line: The upward movement in gold is largely driven concerns for the global economy. Trump's trade war with China is only exasperating the tension.

The continued upside movement in gold prices will greatly depend on the duration of the trade war "spat" with China and its implications toward global growth.

All things remaining constant, models suggest gold prices will reach $1550.

By Donald W. Dony, FCSI, MFTA
www.technicalspeculator.com

COPYRIGHT © 2019 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present.  He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.   

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms.  He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

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