May 8, Gold Technical Analysis

Last time I looked at gold, the indicator for the commodity was bouncing up and down smoothly in a well-defined upper channel. Back in those days, all indications were pointing to gold continuing to trade higher and on its way to reaching the high levels last seen on September 2011. The picture has changed completely since, from the beginning of this year when the channel was broken down, Gold has lost as much as 17% and the end of this downward movement seems to be out of sight. On the 4 of April gold opened the day gapping down, it bounced up and down for a couple of weeks forming a double top pattern and moving definitively to the downside. All the indicators accompanying the chart, may be trying to say that the movement down would continue but at a slower pace. RSI is drawing a Cup formation, which is a strong indication of change in direction although its reading is still below the bullish 50 levels. MACD histogram in showing signs of divergence with respect to the gold movement, which may means the sentiment towards gold may be about to change. A main next key level for gold is 480 and then 435, if gold gets to the first level and decides to rebound, it may go up to 650, or a 24.5% gain from its current level. With gold, it is difficult to discern from a technical point of view what may happen next. It is not an industrial commodity, so it may not be moving with the underlying market, however, it is struggling to fulfill its historical mission as an overall gauge of the economy. We may just want to wait and see when investors are ready to pile up in gold again as part of their portfolios.