Digestive Pullback or Top in Gold

• Posted by Greg Harmon
• on September 15th, 2017

Gold has been on a tear since July. At the start it was just another bounce in a mainly sideways motion. But that changed at the end of August when it broke that sideways range to the upside and held over $1300. It continued higher from there reaching a top last week when it touched over 1350 and then stalled. It began a pullback this week and finds itself $25 lower as I write Friday morning.

So is this just a digestive pullback in the uptrend before it continues to new higher highs? Or was 13590 a top and the bull run in Gold has ended? Nobody really knows until the shiny yellow rock tells us through market price action. Last week I noted why I think it is in a long term uptrend with a change of character here. That may hold up or fail. But the short term chart gives some clues and price levels to watch to help determine which path it follows.

The chart above shows the price action for Gold over the last 2 years. It made a top last summer and started lower in the fall, finding a bottom near the end of the year. The bounce from there ran into resistance and then spent 6 months in that channel we talked about earlier. Then came the push higher. There are two things to note on the chart catch my attention and may offer a sense of direction in the short term.

The first is the 20 day SMA. Gold moved above that moving average in July and has remained above it ever since. The current pullback touched the 20 day SMA Thursday and bounced. If it continues to hold over the 20 day SMA it is positive for a short term reversal back higher. The second is where it reversed. It stalled last week right at a 88.6% retracement of the move to the downside. This is a key level for traders and many would be selling then. A push back over that would be very bullish for Gold.

The backdrop remains positive with momentum bullish, although waning. And the Bollinger Bands® are driving higher along with all the short term moving averages. Bottom line: Gold remains in an uptrend, but a move under the 20 day SMA would shift the view lower. Conversely a push back above 1350 renews the bull run.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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