In our previous article on gold, we examined the situation in the U.S. dollar and the euro because many times in the past they gave us important clues about future precious metals’ moves. At that time we wrote in the summary:
(…) gold's lack of will to really (!) react to positive news, like the dollar's huge intra-day drop, is a bearish piece of information on its own and an indication that gold is likely to move lower in the short run.
On the next trading day, after the essay was posted, gold and silver declined and dropped to their fresh monthly lows. With this downward move, gold almost touched the June low. This strong support level encouraged buyers to push the buy button and the yellow metal, which last week saw its best week since October, rebounded to around $1,250. At the same time, silver went back above $20.
Will the recent week’s rally continue? Before we try to answer this question, we’ll examine the long-term charts of gold and silver to see if there’s anything on the horizon that could these precious metals higher or lower in the near future. We’ll start with the long-term chart of gold (charts courtesy by http://stockcharts.com).
Even though a lot happened last and this week, from the long-term perspective not much changed on the gold market.
We saw a move back to the rising long-term resistance line (currently close to $1,250), but gold only touched it, only to decline once again. At this time the medium-term outlook remains bearish. Any additional rally is not likely to move significantly above this level (from this perspective significantly means not more than $50 above it, which takes significant intra-day volatility into account).
Our previous essay on gold we wrote the following:
Please note that the exact target for gold is quite difficult to provide. In the cases of silver and mining stocks there are respectively: combinations of strong support levels, and a major support in the form of the 2008 low. In the case of gold, there are 4 support levels that could stop the decline and each of them is coincidentally located $50 below the previous one starting at $1,150: $1,150, $1,100, $1,050, and $1,000.
Taking into account the current situation in the yellow metal, the above price targets remain valid.