Between 1980 and 2000, the gold price movement was dominated by the blue triangle (see chart below), whereas a so-called BREAKOUT had already started in 1993 when breaking above the upper-most blue triangle leg at approx. $350 per ounce. For the next six years until 2000, the price did a so-called PULLBACK, which went all the way to the apex of the blue triangle at approx. $250. Thereafter, the so-called THRUST occurred, which is the final movement of a triangular price formation. This thrust to the upside is active ever since as moving healthily along the long-term green upward-channel. Additionally, it is valued strongly bullish when the price succeeds in breaking above the upper-most (green) trend-channel as thereafter, a new mid-termed strong upward-trend is typical.
After the successful breakout above the green (and violet) resistance at approximately $1,300 per ounce in late 2009 to $1,900 in 2011, the price most recently completed a classical pullback to the upper-most green trend-channel at approximately $1,550 – in order to test and confirm this year-long resistance as new long-term support. A sell-signal is not given until breaching this support – hence, a strong and long-termed buy-signal is active at the very moment respectively since holding at the supportive green-violet intersection at approximately $1,550 per ounce.
If solely taking the thrust since the beginning of the new millennium under consideration, one can clearly observe the price moving within the green trend-channel until 2011 – at which time it began a sharp breakout from approximately $1,550 to $1,900. Thereafter a pullback occurred, which trended beneath the red resistance. Recently, a breakout above this red resistance was managed, generating a first buy-signal. A sell-signal is generated when breaching the red or green support currently at approx. $1,650. As the breakout may be still ongoing, one must expect a pullback to the (red or green) support any time – as a final thrust mostly occurs after a notable breakout and pullback.
The perspective since October 2009 shows that the price tends to rise strongly after breaking above the red resistances. This bullish action occurred recently again when rising above the red triangle leg at $1,700. Additionally, the price tended to fluctuate along the green triangle, whereas numerous breakouts and pullbacks were tried in late 2010 and have been (mostly) successfully undertaken since April 2011. As the price breached the green triangle legs (and the grey 260-day moving average) in the end of 2011, another pullback to the green triangle-apex is likely. Yet, a buy-signal dominates at the very moment as the price succeeded in breaking above the red triangle leg recently and a breakout is in the making. However, a pullback may occur any time, which is likely to test and potentially confirm the formerly red resistance as a new support (sell-signal) when breaching it. A sell-signal, à la thrust to the downside, is generated when breaching the lower-most green support currently at $1,600 per ounce.
On the other side, the US Dollar Index (USD) devaluates since 1983 along the blue trend-lines. Additionally, the chart below simultaneously shows a blue triangle out of which a breakout occurred from approximately 92 to 122 points between 1997 and 2002. Thereafter numerous pullbacks to the blue triangle-apex occurred until late 2011. Since then, the USD has begun to rise indicating a thrust to the upside. However, a next distinctive buy-signal is not given until breaking above the red and blue resistances currently crossing each other at approximately 82 points. Hence, a sell-signal may be given shortly when these resistances are reached.
The perspective since 2008 shows that the USD recovered above the green trend-line, currently at 79 points. Having landed on this support recently, a buy-signal predominates at this time. However, a strong sell-signal is generated immediately when breaching both the supportive (light and dark) green trend-lines at 79 points. More definite buy-signals are given when rising above the blue resistance at approx. 79.8 points and the green resistance at 81 points.
Stephan Bogner is senior analyst with Makrocheck Investments & Research, a diversified investment & research group based in Zurich, Switzerland, specialized in the analysis of financial markets & equities for institutional & private investors.
