What’s Up with Gold?

By | March 10, 2019

The SPDR Gold Shares ETF has had a propensity to trade in large triangle patterns on a long term timeframe. Since, early 2014 the fund has been rising in a complex triangle pattern. That is, one smaller triangle that formed in 2017 to 2018 situated within a larger multi-year triangle that began in 2014.

This year the GLD is testing a key intersection of both of those triangle patterns. The resistance line of the larger triangle going back to 2014 is meeting up with the support line of the smaller 2017/2018 triangle, at its apex. This junction at about $127, along with the 2018 highs at $130 has created a zone of resistance.

This zone will be difficult to break through but if it is penetrated, it would signal the end of a long term bottoming process for the precious metal. There is an old technical expression that goes something like, “The longer the base, the higher the space.” It suggests that a long period of basing is followed by a long period of rising prices. My response is, “One step at a time and keep your stops tight.”

Let’s take a look a closer look at the weekly chart.

Consolidation in the last half of 2018 formed a cup and handle pattern. We highlighted the formation early this year and its projected upside target price. That pattern objective was reached last month and the GLD pressed on up to briefly test the $127 level. But by the end of February it had dropped back down to the 38% retracement level of the 2018 low and its recently made high.

At the time were bullish on gold and expected that after reaching the cup and handle pattern target price, the GLD would continue on and break above long term resistance. That was pure speculation and in hindsight it seems more logical that, after achieving its target objective a pullback was in order.

Last week the Gold Shares touched the 38% retracement l level of the 2018 low and last month’s high range. On Friday they gapped higher on the open and closed near their high. The end result was a strong looking white candle on the weekly chart.

At this point, it looks like the $117 to $121 area is wide ranging support and the $127 to $130 level is wide ranging resistance. The series of higher lows and the positive Chaikin money flow reading suggest resistance will be tested again.

As we said at the beginning of the year if the Gold Shares ETF does break out it could move significantly higher, but that breakout would not be promulgated by just from a change in the technical condition of the ETF, “It would probably be derived from some deeper undercurrent in the broader market. Not sure what that undercurrent would be but the implication is that it might not be a good thing.”

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