Gold is on the move higher.
The yellow metal gained 1% last week. It closed Friday at its highest level in three months. And if the dollar continues to fall (like we wrote about last Thursday), then 2018 might be the year for big gains in gold.
Take a look at this weekly chart of gold…
Weekly charts are helpful in analyzing the longer-term outlook. Day-to-day fluctuations don’t matter – it’s the closing price at the end of each week that gets plotted on a weekly chart. And traders can use weekly charts to project patterns that may play out several months – or even a few years – down the line.
This weekly chart of the price of gold has been tracing out an ascending triangle pattern for the past fifteen months. This is a bullish pattern. It’s formed as a chart makes a series of higher lows, yet still finds resistance at the same level.
If the chart can break above resistance, it often leads to a powerful move higher.
Gold has immediate resistance at the $1,350 level. The current rally is only the second test of that resistance level.
It will be tough for gold to break above that level on just the second attempt. But who knows? The dollar looks like it’s breaking down. And if the selloff in the buck accelerates, then perhaps gold can break out and run towards the $1,400 level on this current rally. That would match gold’s highest price in four years.
And that’s where it gets interesting.
You see, when a chart breaks out from an ascending triangle pattern, the price target is calculated by adding the height of the triangle to the resistance line.
In the case of gold, the bottom of the triangle is $1,150. The top is $1,350 – a $200 difference. So, a breakout from this pattern projects a $200 rally.
That gives us a price target of $1,550 – which just about matches the highest resistance line I’ve drawn on the chart.
I’m going to go out on a limb and say gold will hit $1,550 per ounce sometime in 2018. It won’t be a straight shot higher, of course. Gold has multiple resistance levels overhead. It will likely chop back and forth as it challenges each level.
Ultimately, though, this weekly chart of gold is quite bullish. We’ll likely see some solid gains in the metal this year.
Best regards and good trading,
In today’s mailbag… a correction.
3.5 million is NOT 10% of the US population. It’s only 1% of our 300+ million population.
– Thomas G.
You might tell Jeff Brown that the 3.5 million “ghost” accounts that Wells Fargo opened is 1% of the US population, not 10% as he stated.
– Jeffry W.
I’m no math wizard, but I can tell you that 3.5 million is only 1% of the approximate population of the U.S. (350 million).
– Jim D.
Thanks to the many keen readers who wrote in to right our mistake. The original essay, “Why Big Banks Are Terrified of This Technology” has been corrected and noted for the record.
And as always, feel free to send in your trading stories, questions, suggestions – and corrections – right here.