Gold looks like it could use a rest…
The price of the shiny, yellow metal has rallied nearly $200 per ounce over the past month.
And it’s probably headed much higher in the months ahead.
But for the very short term, it looks like the gold rally is on pause.
To see what I mean, take a look at gold’s chart…
Last week, the price of gold ran into resistance as it approached its August high near $1820.
At that point, all the various moving averages (blue, red, and green lines) were expanded quite far away from each other. So, there wasn’t much energy available to fuel a rally above the $1820 resistance line.
Readers should also note that all the momentum indicators at the bottom of the chart (MACD, RSI, and CCI) were showing negative divergence.
In other words, as the price of gold rallied to a higher high, the momentum indicators were making lower highs. This negative divergence is often an early warning sign of an impending decline.
Since then, gold pulled back and tested the support of its 9-day exponential moving average (EMA – red line). And support has held… so far.
|
Free Trading Resources Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career – at zero cost to you. Just click here to check it out. |
The various moving averages are still too far apart to fuel another strong move higher. That makes it hard to argue for an immediate rally.
Instead, the best the gold bulls can hope for is a several-day period of choppy, back-and-forth action that allows the moving averages to catch up to the price of gold… to coil together… and build fuel for another rally attempt.
The worst case would be a sell-off down to one of the lower support lines near $1750 and $1710.
Gold tends to trade weak ahead of a Federal Open Market Committee (FOMC) announcement on interest rates.
So with the next announcement due Wednesday, it seems gold may be headed to one of those lower levels.
That doesn’t mean traders should be selling gold right here. The long-term outlook remains as bullish as ever.
But folks who are looking to put new money into gold should consider waiting a few days. We may be able to get in at lower prices.
Best regards and good trading,
 |
Jeff Clark
Reader Mailbag
Are you still bullish on gold’s long-term outlook?
Let us know your thoughts – and any questions you have – at [email protected].