The action in Gold has been very interesting lately and it seems the precious metal is gearing up for a run at its all-time high, set nearly 5 months ago, and perhaps beyond. At the time of this posting, 5:50 am Pacific time, Gold is down $2 an ounce to $1,163.
John, BMR’s technical analyst, has provided us with a couple of charts this morning as well as some comments. The first chart combines Gold with the CDNX while the second chart is strictly the CDNX.
John: Today’s weekly chart shows the correlation between GOLD (continuous contract) and the CDNX Index. GOLD is shown in candle form while the CDNX is a solid black line. The two indicators, “RSI” and “ADX”, refer to GOLD.
First, let’s consider GOLD. Looking at the chart we see that since the minor reversal near the end of 2009, GOLD has has a sustainable climb supported by its 20-day SMA (blue line). From the recent low at the beginning of February, GOLD has systematically climbed and formed a bullish ascending triangle shown bounded by a thin blue horizontal line at $1,165 and a thicker upsloping line. This thin blue line and the one above it at $1,226.40 form a band of resistance that GOLD must overcome to move to higher levels. At the moment, GOLD is right at the bottom edge of this resistance.
The CDNX has been climbing in an upsloping channel (green line) in tandem with GOLD and its 20-day SMA.
The top indicator, RSI, is shown climbing in an upsloping channel (orange lines) indicating increasing strength for GOLD.
The “ADX” trend indicator has the black ADX trend strength line turning up and with the +DI (green line) above the -DI (red line), this indicates the trend is bullish and strengthening.
The outlook for GOLD is bullish as shown by the ascending triangle on the chart and the continued bullish movements of the RSI and ADX.
GOLD now has to overcome the band of resistance before it can move to new highs. If the band is overcome, the expected new initial high will be $1,286.
Below is a chart strictly on the CDNX. At the moment the CDNX is consolidating in a horizontal channel as shown by the blue lines. Until it breaks through the top line we cannot assume anything.
The ADX line is going down, showing that the trend is weakening, but the +DI is above the -DI which keeps it bullish.
The RSI is above 50%, so it’s bullish but virtually flat.
The CDNX must break above the top blue line and that will take higher volume.
