Gold Market Update

July 22, 2019
Technical Analyst & Author

It’s a case of “so far so good” for gold, which is breaking out on schedule from its giant complex Head-and-Shoulders base that may also be classified as a Saucer base, as can be seen on its latest 10-year chart…

On the 4-year chart we can see that gold’s breakout move last month has resulted in its becoming overbought, which partly explains why is hasn’t gone anywhere in recent weeks. This is normal following a breakout and it could react back to about $1375 before the advance resumes.

On the latest 6-month chart we can see that recent price / volume action increases the risk of a near-term reaction, because gold has tried twice to break out of a possible bull Flag / Pennant, on Thursday and Friday, and failed, with this failure (thus far at least) made more likely and perhaps presaged by the weak Accumulation line. A failed Pennant breakout usually leads to a period of retreat.

While gold’s latest COT readings do not preclude further advance, it is clear that it would benefit from an easing of current Commercial short and Large Spec long positions which are rather extreme and increase the chances of some sort of reaction here.

Click on chart to popup a larger, clearer version.

So, the big picture is strongly bullish, but, barring the Iran situation dramatically worsening, it looks like a period of consolidation /reaction is likely before further significant gains are made. If gold and the sector do react, it is considered unlikely that it will be by much and any such reaction may be used to add to positions across the sector.

It was rather odd late last week that while gold tried to break higher but failed to, the PM sector forged ahead on Wednesday and Thursday, as we can see on the latest 6-month chart for GDX. Normally, stocks rallying leads to gold following suit, but gold’s price/volume action was not bullish for the near-term, and nor was the action in GDX on Friday, which saw a bearish Harami pattern appear, which is where a large candle the previous day is followed by a small one which fits inside the 1st one. This is bearish and usually marks a reversal, and thus probably marks the start of a corrective phase.

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Clive Maund

Clive P. Maund’s interest in markets started when, as an aimless youth searching for direction in his mid-20’s, he inherited some money. Unfortunately it was not enough to live a utopian lifestyle as a playboy or retire very young. Therefore on the advice of his brother, he bought a load of British Petroleum stock, which promptly went up 20% in the space of a few weeks. Clive sold them at the top…which really fired his imagination. The prospect of being able to buy securities and sell them later at a higher price, and make money for doing little or no work was most attractive – and so the quest began, especially as he had been further stoked up by watching from the sidelines with a mixture of fascination and envy as fortunes were made in the roaring gold and silver bull market of the late 70’s.

Clive furthered his education in Technical Analysis or charting by ordering various good books from the US and by applying what he learned at work on an everyday basis. He also obtained the UK Society of Technical Analysts’ Diploma.

The years following 2005 saw the boom phase of the Gold and Silver bull market, until they peaked in late 2011. While there is ongoing debate about whether that was the final high, it is not believed to be because of the continuing global debasement of fiat currency. The bear market since 2011 is viewed as being very similar to the 2-year reaction in the mid-70’s, which was preceded by a powerful advance and was followed by a gigantic parabolic price ramp. Moreover, Precious Metals should come back into their own when the various asset bubbles elsewhere burst, which looks set to happen anytime soon.

Visit Clive at his website: CliveMaund.com

Gold weighs 19.3 times as much as an equal volume of water.

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