Wednesday, April 6, 2011

Gold Market Update

On the multi-year chart, Gold is clearly in a bull market. First, there is a strong upward sloping trendline that started at the beginning of 2009 that is still intact. Along the way, prices have consolidated in dowward sloping pennant patterns, shaking out the weaker money. This chart uses weekly candles, so the EMAs are also weekly. Notice all are rising and the shorter are above the longer. In short, this is a very strong bull market.

The daily chart shows that prices -- which had run into considerable resistance in the 140 area, have now convincingly moved through that area Note the strength of the candle that broke through. The EMA picture -- like the monthly chart -- is also very strong with all EMAs moving higher and the shorter above the longer.

The primary technical indicators are giving a mixed reading. The A/D line has been stagnant since the fourth quarter of last year -- a reading that is confirmed by the weak CMF reading. Ideally, we'd like to see strong numbers confirming an uptrend. Over the same period of time, gold hit resistance in the 140 area, so the stalling could be a result of people taking stock of the fundamental situation. Also note the MACD dropped during this time. It has given a buy signal recently, but the overall pattern of the MACD is a bit weaker than we'd like.

Gold is benefiting from several fundamental trends.

1.) The drop in the dollar
2.) The rise of other commodities
3.) The rise of uncertainty

All three of these events is powering golds upward move . While the technical indicators are a bit weak, the weakness can also be attributed to gold stalling/consolidating below 140. The multiple attempts to get through 140 have now resulted in a move higher.