Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold: The Line of Least Resistance

Commodities / Gold & Silver 2009 Jul 02, 2009 - 02:51 AM GMT

By: Frederic_Simons


Best Financial Markets Analysis ArticleGold ! The ancient metal of kings. A lot has been written and discussed lately about gold's ability and inability to go parabolic and move past the 1000 USD barrier. There are fundamentally based discussions about effects of quantitative easing, the monetary basis, M3, the prospect of hyper-inflation vs. deflation, derivatives, artificial gold price suppression, Commitment of Traders reports. 

While all of these topics are quite interesting to read about, but if you are trading gold in the futures market or by playing the GLD ETF, your trading decisions might not actually benefit from any "knowledge" (or rather confusion) acquired by reading any of the subjects mentioned above. 

It is always good to know that - as with gold - fundamentals are more likely to support rising prices than falling prices in the long term, ie using a time horizon of 5-10 years. However if you are trading gold's up- and downswings, these are not considerations that should influence your trading decisions. Even over the intermediate term (months), price action may well be "out of tune" with fundamentals. A margin call because of a losing gold futures trade would certainly not be more comforting if the fundamental idea behind the trade "feels" right or sensible.

Therefore, I prefer an approach that bases short- and intermediate term trade decisions on the actual behaviour of the gold price, not on fundamental aspects. For this purpose, I developed a proprietary indicator that finds out the line of least resistance both to the downside and to the upside, and prints them on the chart as a green line (buy line) and a red line (sell line). You can see on the following charts that if the price trades for 2 consecutive bars above the green line, rising prices are to be expected. Once the price trades for 2 bars below the red line, you should prepare for falling prices:

So on the bigger timeframe (180min chart), gold is currently rangebound between the lines of least resistance: 947.1 and 925.5 USD, as evidenced by the one-bar spike to the downside and yesterday also to the upside. Both lacked the required follow-through to break out of the established range.

So as a trader, possible plays would be to play the break-out of this range, be it to the upside or the downside. Just let the market decide if we see Gold at 1000 USD next or at 900, and follow the line of least resistance.

If you have any questions, please do not hesitate to contact us by writing an email to

By Frederic Simons

© 2009 Copyright Frederic Simons - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed

© 2005-2022 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in