Gold has made impressive gains so far this year, but when it spiked up to touch $3500 in the middle of April it become heavily overbought which is why it then went into a rectangular consolidation pattern that has given time for the overbought condition to fully unwind, as shown by the MACD indicator on its 6-month chart below, and has also allowed its moving averages to catch up, especially the 50-day which has now fully closed the gap with the price. Because there is still a considerable gap with the 200-day it means that there is room for the price to break down from the Rectangle and correct back towards or to this average. In attempting to weigh the probability of this happening versus the price instead breaking out upside from the Rectangle we need to inspect the volume pattern and volume indicators which normally provide valuable clues in a situation like this. However, volume and volume indicators are no longer provided by Stockcharts for the metals but we can get around this problem by using a chart for the same time period for reliable gold proxy SPDR Gold Shares, whose chart is almost identical, which does show volume and volume indicators.
So, on the 6-month chart for SPDR Gold Shares we see that, while the volume pattern is a little hard to decipher, the Accumulation line has continued to trend higher from the April peak as the price has tracked sideways and has even made new highs in recent days. This is bullish and implies that, rather than breaking lower into a correction, GLD and thus gold itself will instead break higher into a new upleg. If it does break lower a likely scenario is that a short, sharp drop is followed by a rapid reversal to the upside.
Zooming out now to look at gold on a longer-term 6-year log scale chart we see that it broke out early last year from a big trading range to commence a powerful uptrend – an uptrend that remains very much in force, with the price still well above the lower rail of the channel – even if it broke down from the Rectangle shown on the chart above and dropped to the $3100 level it would not violate this channel. On this chart we can better see just how overbought gold got last April, hence the trading range that has since formed that we looked at above.
Zooming out again via a very long-term log-scale chart going all the way back to the start of the millenium, i.e. to the year 2000, affords us an overall Big Picture perspective. This chart makes clear that the breakout early last year from the large trading range that started to form in the middle of 2020 actually marked the breakout from the Handle of a gigantic Cup & Handle continuation pattern that started to form as far back as 2012. This is a truly enormous consolidation pattern that certainly has the capability to support a correspondingly big bull market and as we are only about 16 months into this major new bull market, it clearly has much further to run.
In conclusion, we are looking for a breakout from the current rectangular trading range that has formed from April into another major upleg. If gold should instead break down from this range and correct back towards or to its rising 200-day moving average and the lower rail of its uptrend channel, it should then reverse back to the upside into a vigorous uptrend. Volume indicators are suggesting that the former scenario – a breakout into another upleg from the trading range without any further corrective action first – is more likely to prevail.
End of update.
ANNOUNCING THE ROLLOUT OF A NEW WEBSITE: GREAT RESET GOLD (greatresetgold.com) created primarily to serve the needs of gold and silver mining companies.
The Great Reset is upon us and it cannot be stopped because this euphemistic term refers to the inevitable collapse and implosion of the gargantuan debt bubble that marks the terminal phase of the latest fiat experiment with its “death throes” being distinguished by Venezuela and Zimbabwe style currency and debt creation. Small wonder then that gold and silver are taking off and set to do a moonshot as capital scurries for safe haven to escape the ravages of the impending hyperinflationary depression that has already begun in many places.
While many industries and sectors will be wiped out when this storm really hits, one of the few sectors that is set to do really well is the Precious Metals sector with many gold and silver miners, especially those that in are production or headed in that direction, set to make windfall profits – many large and mid-cap gold miners are already making money “hand over fist” as a yawning gap opens up between their all-in sustaining costs (ASIC) and the surging gold price, a gap that looks set to get much larger.
Thus, while many ordinary middle-class citizens are buried in debt and being forced to the wall by the ravages of inflation, so that their disposable income, if they have any, continues to shrink, gold and silver miners are entering an unprecedented boom time that looks set to continue at least until the planned CBDC system is fully operational which is likely to take several years at least. In total contrast to the situation that existed for Precious Metal miners about 10 years ago, they are at the threshold of a true bonanza period which will be their just reward after many years of perserverence and hard work.
Enter Great Reset Gold (greatresetgold.com) which is the brainchild of senior economic geologist Nigel Maund and experienced Technical Analyst (chart analyst) Clive Maund, otherwise known as Maund & Maund or The Maund Brothers. Great Reset Gold has been created to serve the needs of the management of gold and silver mining companies requiring a comprehensive yet succinct document that is updated on a regular basis providing an overview of their company and its stock, both from a fundamental and technical perspective, either for in-house use by management or for the purpose of raising the profile of the company and its stock across the industry and the investment world. Although a website, Great Reset Gold is really a portal through which the management of gold and silver mining companies or other interested parties can contact us to organize the production of a report about the company or companies you are interested in. Please note that Great Reset Gold is a “work in progress” that will adapt and evolve in response to the requirements of our market.
Go to greatresetgold.com to review the site and there you will find a report on mid-cap gold producer B2Gold Corp as a complementary example and you can contact us directly at support@greatresetgold.com
End of announcement.