Strong Technical Support for Gold

Gold hasn't provided much excitement for gold bugs like myself lately. Its dollar price has trended lower ever since its peak in August, and it's currently trading about 15% below its all time high. However, this trend looks set to reverse, and I wouldn't be surprised to see another all time high by the end of the year.

Looking at the daily chart, we see a double bottom at $1675 that formed this March. In the weekly chart we see that this corresponds to a price range with much resistance from April to June last year. What was then resistance has now become support. Furthermore, the monthly chart reveals that this price level posed much resistance from 2011 to 2013 as well, so the current price level looks set to become a firm base for another leg higher in the price of gold.

Further cementing this impression, we see what looks like a giant cup and handle formation. I first mentioned this back in January. However, the technical signal for an imminent move up broke down shortly after my post, and things have looked lacklustre ever since. But if gold breaks out above $1760, as seems likely, chances are good for an initial sprint up to $1860, which is the top of the current down trend. If it breaks above that level as well, the handle will likely complete within this year, which would put within reach a price of $3000 as soon as next year.

The combination of strong support and much potential to the upside, makes the current price level an ideal entry point. Furthermore, search interest for gold is still below that of Bitcoin, so there's opportunity to be had in that the crowd is currently preoccupied with other things. But this situation will not last much longer. The bullish sentiment we had for gold last August will no doubt return, and that will form a strong tail wind for the gold price going up.

Rococo Cup with handle

By Vincennes Porcelain (France, circa 1739–1756), Francois Binet (France, active 1750-1775, born 1731) - Image: http://collections.lacma.org/sites/default/files/remote_images/piction/ma-31852871-O3.jpg Gallery: http://collections.lacma.org/node/229367 archive copy, Public Domain, Link