Published 9th January 2019
Our bullish assessment for precious metals proved so far by and large correct. They have been outperforming equities during the past few months. Gold gained roughly 11% from its mid-August low. Price action unfolded a relatively weak and choppy upside trend, which is depicted by the pale blue channel in the very first chart below. Lately, there was an acceleration in upside momentum. The question remains if it will be an impulse (black) or a leading diagonal (red).
Gold and silver approach mid-term trend supports. That’s the red dotted trend in the very first chart below. It tracks price action from the 2011 top. Technically oriented traders most often observe these longer-term trend relationships. This typically creates supply against the shorter term trend and leads to a correction. We have been witnessing some difficulty in gold and silver to rally over the past few days. Despite further rally potential, a more significant correction is likely to set in somewhere around the current levels. The next correction will probably determine whether silver had a cyclical trend change in November 2018 or not. We do not want to see more than 78% retracement of the rally that unfolded of the November lows. Retracements of that magnitude most of turn out to be a continuation of the paramount trend instead of a being a corrective retracement.
All in all, the outlook remains positive for gold. Sentiment and position readings were depressed throughout the entire precious metal spectrum. They came up but have not reached extreme readings yet. Moreover, there is no lack of fundamental narratives that could channel liquidity into gold.
The analysis above is a historical abstract of our Gold Premium Analysis. Subscribers can access multiple timeframes, which are not displayed on this page.