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The last time I touched on gold was in late April. At that time, I was predicting a significant bottom in gold prices, as bullish divergences on the chart and a confluence of support around the $370 level were signaling a potential reversal in this precious metal. For example, both the moving average convergence/divergence (MACD) and full stochastics were putting in higher lows despite the fact that gold prices were declining. This is usually an indication of a forthcoming bottom and coupled with significant support, I felt it was a good place to buy gold (or gold-related stocks). |
Since then, gold has made its way back above the $400 level, where prices are now consolidating. However, gold is facing substantial resistance in the $405 to $410 range. More specifically, this is the site of the top black parallel line (or April's downtrend line). Notice how prices have been perfectly contained within the black pitchfork since April, finding support along the bottom parallel line and encountering resistance along the top parallel line. |
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Graphic provided by: Stockcharts.com. |
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Also standing in the way is the 61.8 percent retracement level from the April-May rally, which comes into play just below the $410 level. Since this retracement level tends to act as the ultimate reversal point during corrections, it is no surprise that gold prices recently found resistance here. However, just because prices reversed here does not mean the short-term downtrend will resume. As a result, I would keep a close eye on the $405 to $410 range. If gold can overcome resistance here, the short-term trend will turn positive and prices could eventually make their way up to the $425 level, the site of the green median line. In the meantime, I would continue to hold. |
Glen Allen, VA | |
E-mail address: | hopson_1@yahoo.com |
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