Here is a bullish technical outlook for gold. While I do not agree with the author’s conclusions on a couple of these charts the way he is seeing them are flat out bullish for this fall.
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6 Charts Indicate Fall Strength for Gold
GOLD! Public opinion is divided on it. Some swear by it and some swear at it. Americans were allowed to get involved in it again in 1974 but probably did not get in closer to the 1980 top. What is a difficult decision to buy at $100 all of a sudden becomes an easy decision at $800. The power of the crowd!
Gold has had a good run so far this year, but it looks like the precious metal and the mining stocks are both poised for some fall strength, especially if the U.S. dollar can weaken. Only a very small number of Real Money readers have emailed since January about gold, so I believe the public is not involved. Interest in gold could increase if it reaches $1,400 in the next few weeks.
Here are some charts that support our thinking.
In this 12-month daily chart of the SPDR Gold Trust (GLD) , above, we can see GLD making a small bullish continuation pattern (a flag or pennant) as prices hold above the 50-day moving average line. The 200-day average is moving up strongly. The On-Balance-Volume (OBV) line started to improve in the past week and helps support the advance. The Moving Average Convergence Divergence (MACD) oscillator generated a cover-shorts buy signal and could soon cross above the zero line for an outright go-long signal.
Traders who are involved in precious metals will closely track the currency market. A weaker dollar can put a bid in for gold and silver. The price of the DXY, the dollar index, looks like it has formed an equilateral triangle the past two months. A weakening MACD oscillator and a bearish divergence between the price action in August and September and the momentum study could be just enough to tip prices lower in the next couple of weeks.
In this daily chart of the VanEck Vectors Gold Miners ETF (GDX) , above, we can see a small equilateral triangle formation developing since late August. The MACD oscillator has signaled a cover-shorts buy signal while the OBV line has only declined slightly the past two months as prices declined about 18%.
In this daily chart of VanEck Vectors Junior Gold Miners ETF (GDXJ) , above, we see a bullish-looking triangle formation that in subtle ways is more bullish than the GDX pattern. In September, the GDXJ makes higher lows while the GDX makes equal lows. Also, the OBV line on this chart of GDXJ hardly dips at all.
Some gold followers like to keep track of the HUI, the NYSE Arca Gold BUGS Index, and this chart is also poised to move higher with the cover-shorts buy signal from the MACD oscillator.
The PHLX Gold/Silver Index (XAU) also displays a bullish setup in this chart.