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Gold Is Ready To Fight Trump Resistance

Gold Is Ready To Fight Trump Resistance

On the 4th of September the markets were closed in US for Labor Day, but precious metals gaped up  during Asian session what brings us exactly to the level where the Trump election sell-off began 10 months ago. 

Precious metals performance in 2017 is rather impressive. Especially during past few weeks of summer what was traditionally weaker period for gold. Traders were able to withstand several concentrated selling pressures and regain confidence faster compared to previous sudden sell-offs.

If you remember the day when Trump won the election the immediate reaction was a huge upward spike in price. This was expected market behavior given the unexpected development for many political pundits and wider public. Only that after few moments the whole market got under extreme sell-off after which gold continued to fall 16% until the end of December 2016.

Gold price reaction on 8th November 2016 when Trump was elected president . (daily chart)

Gold price reaction on 8th November 2016 when Trump was elected president . (daily chart)

It was a very strange behavior and if you asked any analyst before election results what will happen when Trump wins, I believe almost all of them would expect gold price to skyrocket. But in precious metals, we live a different kind of world for the past few years so no one argued about the strange development.

Gold down trend after Trump election results. (daily chart)

Gold down trend after Trump election results. (daily chart)

The sell-off interrupted the very promising confirmation of new bull market in gold when first gold created the technically important rounded bottom in 4Q2015 with a formation similar to Cup & Handle.

Trump election gold price high was pointing to the bullish breakout after 5 months of consolidation.

Bottoming gold market 4Q 2015 (daily chart)

Bottoming gold market 4Q 2015 (daily chart)

Afterwards gold got into a creation of a skewed reversed Head & Shoulders formation which was again in alignment with bull market continuation supported by the long list of supporting factors discussed here - 13 reasons why to own gold after breaking above $1300.

Potential reversed Head & Shoulders Formation (daily chart)

Potential reversed Head & Shoulders Formation (daily chart)

On top of this the upward trend was supported by much bigger technical picture development of breaking above long-term declining trendline from the gold market top of 2011. 

Potential end of 6 year bear market started in 2011 (weekly chart)

Potential end of 6 year bear market started in 2011 (weekly chart)

All looked very well prepared for gold price to break out of reversed Head & Shoulders formation when gold at the same time broke back above carefully watched 200-day moving average.

Gold getting back above 200MA and breaking our of reversed Head & Shoulders formation (daily chart)

Gold getting back above 200MA and breaking our of reversed Head & Shoulders formation (daily chart)

But then gold started the 5-months consolidation period, oscillating in $80 dollar range, which potentially served as a good accumulation period before the potential bull market restart.


Last week marked another important milestone in the gold technical picture with the creation of new highs for 2017. Broken $1300 level should now serve as a new baseline support if gold traders are serious about starting the anticipated bull market. The breakout was clear and strong with immediate rise to $1328 per ounce.

Gold breaks out of sideways consolidation pattern (daily chart).

Gold breaks out of sideways consolidation pattern (daily chart).

Yesterday on 4th of September 2017, when people were celebrating Labor Day in the US, the gold market broke for a brief moment the Trump election high in gold price.

Furthermore, gold is nearing 20% gains from the market bottom of December 2014 what is a generally accepted measure of major change in trend.

Gold getting close to 20% rise signaling end of bear market (daily chart).

Gold getting close to 20% rise signaling end of bear market (daily chart).

So from technical perspective gold is now looking to take out 2 major price levels in a very narrow range which can dramatically change the narrative about gold and get the attention of wider public.

  • 2016 highs around $1380
  • 2014 highs around $1400
Near term price targets for gold - 4 year highs in sight.

Near term price targets for gold - 4 year highs in sight.

Potential price break above $1400 dollars would mean new gold highs for the past 4 years and at the same time creation of higher highs and higher lows pattern needed for bull market confirmation.


Downwards we now have the support line created from previous strong resistance at $1300. Ìf gold starts to reverse the rising trend all 3 major moving averages (50,100,200MA) are trending together to provide additional support. 

Moving averages coming to help gold hold above $1300 level

Moving averages coming to help gold hold above $1300 level

To summarise gold price technical picture: 

  • gold price moved out of 6 year downtrend
  • gold broke bullish reversed Head and Shoulders pattern
  • gold broke and holds above all major averages 50,100,200 days MA
  • gold 50 days MA and 100 days MA broker above 200 days MA
  • gold broke above 5 months sideways consolidation pattern
  • gold broke above psychological level $1300 creating higher highs and higher lows pattern
  • gold is close to gaining 20% from 4Q2016 lows which marks change in bear market.

All of this suggests that gold is technically ready for the new bull market. Combining this picture with my previous discussion on fundamental trends supporting gold plays well for gold bugs. But always remember..

There is only one side of the market and it is not the bull side or the bear side, but the right side.
 
Jesse Livermore

 

PS: feel free to repost this blog with proper attribution and linking back to source.
Cloud Formation In Gold and Silver During First Regular September Session

Cloud Formation In Gold and Silver During First Regular September Session

13 reasons why to own gold after breaking above $1300

13 reasons why to own gold after breaking above $1300