Gold Market Update

By: Clive Maund | Mon, Aug 15, 2011
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Originally published August 15th, 2011.

Gold has shown impressive strength over the past couple of weeks having risen as high as the $1800 area. On our 6-year chart we can see how it has punched through the resistance at the upper boundary of an important inner trend channel, and despite now being hugely overbought, appears to have its sights set on the outer trend channel boundary now in the $1900 area before this strong upleg is done.

Gold 6-Year Chart

On the 6-month chart we can see recent action in more detail. While it certainly looks extremely overbought on its MACD indicator on this chart, we can also see reasons why it could well continue higher over the short-term anyway, namely the moderation of the short-term overbought condition shown by the RSI indicator and the volume dieback on the reaction of recent days, which is bullish.

Gold 6-Month Chart

The view that gold is set to turn higher again and advance to the $1900 area before this intermediate term upleg is done is supported by the latest COT chart, which shows a marked reduction (as of Tuesday last week) in the Commercial short and Large Spec long positions - which is not what you would expect to see if gold were set to react back more heavily.

Gold COT

While our immediate target for gold is the $1900 area, we cannot rule out and would not be especially surprised by a "rocket move" developing soon, which would involve it blasting out of the upper channel and accelerating upwards in a parabolic arc. This would of course be likely to synchronize with a severe drop in the dollar with gold being given an added boost by the decreasing popularity of Treasuries - if only a tiny fraction of the panic money that flees into Treasuries were sluiced instead into Precious Metals, they would go ballistic.



Clive Maund

Author: Clive Maund

Clive Maund,

The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

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