This Line is More Important for Gold Than the 200-day SMA

Back in December you couldn’t get investors to touch gold even with a 10-foot pole. From low to high, gold has rallied 13% since and analysts are starting to up their full-year targets. This could be a costly mistake.

About 50 days ago analysts gave gold a snowball’s chance in hades to move higher.

The December 2013 headlines below show that investors were as bearish about gold as they were bullish about the S&P 500 (NYSEArca: SPY).

Bloomberg: Gold’s drop to lowest since 2010 seen extending next year by Goldman Sachs
Forbes: Gold may be on verge of a waterfall-style decline
Wall Street Journal: Gold is testing last ditch support before it falls further into the abyss
Bloomberg: Gold trades below 1,200 as growth outlook curbs haven demand
Wall Street Journal: Gold’s glimmer gone, mutual funds feel the pinch

Those bearish headlines and other sentiment gauges contributed to this contrarian assessment by the December 29 Profit Radar Report: “Gold sentiment is very bearish (bullish for gold) and prices may bounce here.”

Up until February 11, gold’s rally attempts were feeble, with gains of less than 4% since the December 31 closing low at 1,204.

Gold broke free of its short-term technical shackles on February 12, when the Profit Radar Report noted: “Gold has broken above red trend line resistance (dashed red line), but has been held back so far by silver’s inability to move above 20.64. Odds favor higher gold prices as long as 1,254 holds.”

Silver confirmed gold’s move on February 14 (when it surpassed its prior highat 20.64), which helped gold jump above its 200-day SMA.

However, as the weekly long-term gold chart shows, there’s significant trend line resistance right around 1,335, which has kept a lid on gold’s rally.

The short-term daily gold chart illustrates additional short-term support/resistance levels. It also shows that RSI confirmed the recent rally high, which suggests new highs in the future.

However, any new highs could be short-lived. A thorough analysis of gold money flows – in particular Gold ETFs like the SPDR Gold Shares (NYSEArca: GLD) and iShares Gold Trust (NYSEArca: IAU) – strongly suggests that new lows for gold and silver are still ahead.

The article below reveals the reliable pattern that tends to accompany major gold bottoms. The Missing Tell-Tale Sign of a Lasting Gold Market Low

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s