Gold has had a tough few weeks.
After peaking just above $1,360 per ounce in early April, the price of the shiny yellow metal has crumbled. It traded as low as $1,303 yesterday.
That’s a decline of more than 4% in just about three weeks. OUCH.
This short-term selloff, though, is a good thing – especially for folks looking to add longer-term exposure to gold.
You see… the long-term picture remains quite bullish. Take a look at this weekly chart of gold…
Weekly charts are long-term charts. Patterns on this timeframe usually take several months to play out.
This weekly chart of gold shows the price tracing out an ascending triangle pattern. This is a bullish pattern where the chart makes a series of higher lows while running into the same resistance level. Most of the time, this pattern resolves by breaking out to the upside and accelerating higher.
There’s room for gold to work slightly lower over the next few days. The price could decline to the rising support line at about $1,295 – which lines up well with the 50-week moving average.
Notice, though, that all of the various moving averages are in a bullish configuration. That means the 9-week exponential moving average (EMA) is above the 20-week EMA, which is above the 50-week MA. It’s rare to see strong declines occur with this setup.
It seems far more likely, to me at least, that any further decline in the price of gold is likely to find support near $1,295. Then it will start the next rally attempt. And – should that rally push gold above the resistance line at about $1,365 – it could kick off a longer-term bullish move towards the $1,580 level.
It has been tough for holders of gold to watch the price decline over the past few weeks. But that decline is temporary.
Gold is likely to be much higher by the end of the year than where it is today. Traders should take advantage of short-term weakness to buy intermediate-term positions.
Best regards and good trading,
Jeff Clark
P.S. As volatility ramps up, it’s good to keep gold and gold stocks in mind. They’re a great way to hedge against a falling stock market.
But I recently started using a different method for trading volatile markets – one that practically guarantees my readers are on the right side of the market when it makes a big move.
Keep an eye on your inbox tomorrow for more details…
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