A move to $1,350 or higher in Gold is likely in this second half of 2010, which really isn’t too hard of a prediction to make, but what can we expect from Gold in the immediate short term? BMR’s technical analyst sees some slight weakness ahead but no threat of a drop below the long-term upsloping channel:
John: For the past 3 weeks Gold (continuous contract) has oscillated, sometimes rather wildly, between a low of $1,218 and a high of $1,262 mainly because of the turmoil in global stock markets and the economic uncertainties in Europe, Asia and North America. To try and make some sense of this period and a look ahead I have used a weekly chart.
Looking at the chart we see that Gold is still trading in the long-term upsloping channel (blue lines) and is well supported by the SMA(40). We also can see that for 3 weeks Gold has tried to break through the resistance at $1,260 but to no avail. The chart also shows a divergence between the RSI and price (mauve lines), indicating that over the past 2 weeks the relative strength of the Gold price has been declining.
Looking at the indicators:
We see that the RSI has dropped below the overbought region but is still heading lower – short-term bearish.
The Slow Stochastics is still high in the overbought area and the %K (black line) is moving to break down across the %D (red line) – short-term bearish.
The ADX trend indicator is still in bullish orientation but the +DI (green line) peaked in early May and is declining with the -DI continuing to decline. The trend strength indicator ADX (black line) has reached a peak and is about to flatten and then decline. As I mentioned on one other chart, the +DI tends to peak before the ADX line – the up-trend has started to weaken.
Outlook: Over the immediate term the chart tells me that the Gold price will weaken slightly and probably consolidate between $1,218 and $1,262 until the overbought condition is eradicated. I believe this will be just short-term weakness because as you can see on the chart, the price does not appear to be in any danger of testing the support (bottom line) of the long-term upsloping channel and the ADX is in a relatively strong up-trend mode.
