Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Key Time For Stock Markets: Bears Step Up or V-Shaped Bounce - 24th Sep 20
Five ways to recover the day after a good workout - 24th Sep 20
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Gold is looking overbought in the short-term and could correct lower to $630

Commodities / Forecasts & Technical Analysis Feb 15, 2007 - 03:17 AM GMT

By: Clive_Maund

Commodities We have seen the breakout predicted in the last Gold Market update, although so far subsequent gains have been modest as gold continues to be restrained by the strong resistance level shown on the 1-year chart in the $655 - $680 zone. Although we have seen limited gains so far following this breakout, it was nevertheless an important technical development that is viewed as marking the start of a major uptrend which is still in its infancy.

The open question now therefore is whether gold will go on to break above $680 soon, which would be expected to lead to a rapid run at last year's highs in the $730 area, or whether it will first react back towards the third fan line, which happens frequently after a breakout from one of these 3-arc fan patterns.

The open question now therefore is whether gold will go on to break above $680 soon

Gold has had a significant runup in the 5-week uptrend that began at the early January lows, and is now substantially overbought as shown by its Stochastics, making it vulnerable to a short-term reaction, especially as it is still in a zone of strong resistance, which would actually be a positive development in a sense, as long as it didn't go too far, as it would unwind the overbought condition and thus put gold in better position to stage a convincing breakout.

The RSI and MACD lines are not seriously overbought, on the other hand, and given that an overbought condition as shown by Stochastics can persist for a considerable time, gold may just go ahead and break above $680 soon anyway, overbought or not. Should gold react soon it is important that it does not break below the 3rd fanline and below the upper trendline shown on the long-term chart below. At this point in time these lines are crossing at about $630, with the 200-day moving average just beneath, making this an important support level where we would expect the price to find support on any short-term reaction.

The RSI and MACD lines are not seriously overbought, on the other hand, and given that an overbought condition as shown by Stochastics can persist for a considerable time, gold

On the 6-year gold chart we can see its entire bull market to date, and how it accelerated dramatically in 2005, implying that if anyone was attempting to suppress gold, they weren't making a very good job of it. After the big rise from mid-2005 through May 2006, gold was entitled to take a breather, hence the subsequent reactive phase which only ended with the breakout from the 3-arc Fan Correction a few weeks ago.

While more aggressive traders will want to watch out for a short-term reaction, the bigger picture is that gold is believed to be on its way again, short-term reaction or not, and longer-term investors can safely ignore such minor fluctuations - only in the event of the upper trendline shown on the 6-year chart failing would they have reason to consider standing aside.

The dollar is worth taking a look at here as a resolution of the current standoff in the dollar will likely determine whether gold breaks higher or reacts back to the $635 area.

The dollar is worth taking a look at here as a resolution of the current standoff in the dollar will likely determine whether gold breaks higher or reacts back to the $635 area

After its sharp runup early in January it was hardly surprising that the dollar ran out of steam where it did, as it had into 3 powerful restraining influences, its downtrend channel line, its falling 200-day moving average, and an important resistance level. As we can see on the chart, the intermediate uptrend has collided with the long-term downtrend. Normally this situation resolves with a break to the downside, but with the 50-day moving average turning up beneath the chances of an upside breakout are increasing, although not by much.

This situation needs to be closely watched as a breakout one way or the other appears to be fast approaching - gold and silver are rather out on a limb now and should the dollar break higher here, it can be expected to run to the next resistance level, an event that would be expected to trigger a gold reaction back to the $635 area. Agile traders will clearly want to take appropriate measures in the event that the dollar breaks higher.

The interpretation here does represent a shift to a somewhat more cautious stance near-term than that presented in recent articles.

By Clive Maund

The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


18 Feb 07, 22:11
Re: Gold is looking overbought in the short-term and could correct lower to $630
Sounds like wishful thinking.

A $30-$40 drop from current levels, I don't see it.

Post Comment

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

6 Critical Money Making Rules