Gold Market Update

By: Clive Maund | Mon, Apr 10, 2006
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Having broken out upside from its 3-month long trading range, which was not expected in the last update, gold is now theoretically in position to continue to advance, and may end the current intermediate uptrend by staging a vertical blowoff move. However, the recent advance looks insipid when compared to silver - gold is still only about $15 above the high attained early in February, and in the event of a downturn it is unlikely to find much support in the January - March trading range, because it has not risen sufficiently far away from it. We can observe these points on the 6-month chart, on which we can see that the RSI and MACD indicators are not at overbought extremes, and thus there is room for further short-term gains. The gap with the moving averages remains large, however, and on the 5-year chart we can see that the rate of rise of these indicators is very steep, and thus continues to point to a correction.

On the 5-year chart we can further observe how gold has succeeded in breaking out upside from its long-term uptrend channel, an event that quite frequently leads to a vertical blowoff move, that is followed by an abrupt reversal, especially if, as is the case here, the price is already way above its long-term moving average, signalling that the intermediate uptrend is mature. Not only is the price way above the 200-day moving average, but this indicator is now rising at a very steep rate - a rate that is regarded as unsustainable.

In conclusion, although further short-term upside potential exists for gold, and the current uptrend from the fall of last year may end with a vertical spike, this uptrend is believed to be getting close to terminating. This fits with silver which is getting close to burnout and is likely to go into sudden reverse.



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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