I have often described Gold as nothing more than a shiny rock yellow rock. From a functionality perspective I still believe this. But that rock does have a lot of history attached to it. And that history, thousands of years of it, gives it a great allure. As humans we cannot completely ignore that. Our brains do not work that way.
And as an investor it is even harder to ignore. Gold gets put forth as a hedge for inflation, safety play in times of trouble, and a commodity play. Whether any of these is true is irrelevant to a technical trader. All that matters is the price action. And the price action in Gold has been great.
Take a look at the chart above. It shows the price of Gold over the last 12 months. From the consolidation under the 200 day SMA in June, it moved lower to a bottom in August. The price held there, in a pretty flat consolidation into early October. Since then though the price has been rising.
It was a bit choppy at first, going back to retest the consolidation in November but then moving higher. It stalled at the end of the year, completing a better than 6 month Cup. Most of January was then a consolidation in a bull flag, completing the Handle of the pattern. Earlier this week it broke to the upside triggering the pattern.
The target for the Cup and Handle is a move in price to 1415. That is almost 9% above the current price. Momentum supports more upside for Gold with the RSI rising and strong in the bullish zone and the MACD crossing back up and positive. And the Bollinger Bands® are opening to allow a move higher.
There is a lot of past price action from 1345 to 1365 to work through so it may pause or stall there. But if it can get through that there has bee little history up to 1400 over the past 5 years.
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