Are Technicals Pointing to New Gold Price Rally? / Commodities / Gold and Silver 2021
Althoughwe tend to focus more on the fundamentals here at Money Metals, thetechnical indicators can offer important insights. Such as right now.
Manytraders, investors, andmomentum players will closely examine the market trend to determine if and whento enter or exit the market.
Amarket with a strong technical foundation can launch to dizzying heights, whilea market displaying weak technicals will have a tough time putting together anysustainable upside.
The gold market hasbeen primarily range bound for the last two months. The $1700 and $1800 levelshave acted as support and resistance. Medium term, though, gold has been in adowntrend since its $2,100 high last August.
Thechart has provided some clues, however, that suggest the bulls are finallyregaining traction and the market is potentially gearing up for a breakoutabove $1800 in the coming weeks.Twodistinct clues stand out currently that could point to higher prices…
First,the market has been making higher swing highs with higher lows. Second, thevolume on any pullbacks has been very light, whereas the volume on upside hasbeen stronger.
Themarket, if it does in fact stage a breakout above the $1800 area, it will havecarved out a short-term double bottom. This type of chart pattern is reliableand points to upside gains at least the height of the pattern from bottom toswing high, i.e., a $100 rally.
Againstthe backdrop of improving technicals in the gold market, the yellow metal alsoenjoys support from fundamental factors such as increasing inflation fears,easy monetary policies, and staggering federal deficits.
TheFederal Reserve is meeting again this week and will announce its decision onpolicy and hold a press conference today to spin its message out to thefinancial markets.
Nochanges are expected from the central bank, but market participants will payvery close attention to the bank’s commentary looking for any clues about thepath of policy going forward.
Inaddition to the threat of rising inflation and easy monetary policies, the goldmarket may also benefit from a stock market reversal assuming one develops.
Stockshave continued their ascent despite numerous issues in the way and manyanalysts seem to be of the opinion that a top could be near or at hand.
Giventhe rapid and extended rise in equities, a significant decline could take placethat has the potential to rapidly drag equity prices sharply lower.
A stockmarket decline of 10, 20, even 30+ percent could pave the way for sharplyhigher gold and metals as investors seek out perceived safe havens to putcapital to work.
Thehigh and rising levels of U.S. debt should also add fuel to the fire.
TheU.S. debt is now at a record, and rising-debt to-GDP ratios could signaltrouble on the horizon. If a mass exodus from U.S. debt does take place,borrowing costs could skyrocket overnight and the effects on the domesticeconomy could be crippling.
Thethreat of massive inflation exists, and such rising price pressures could sendthe price of gold running to fresh all-time highs above $2,100. Such asituation could even cause the Federal Reserve to simply print even more moneyand monetize debt to force down long-term rates, exacerbating the problem.
Whateverthe case may be, the current technical outlook for gold is looking better thanit has in many months.
Stefan Gleason isPresident of Money Metals Exchange, the national precious metals company named 2015"Dealer of the Year" in the United States by an independent globalratings group. A graduate of the University of Florida, Gleason is a seasonedbusiness leader, investor, political strategist, and grassroots activist.Gleason has frequently appeared on national television networks such as CNN, FoxNews,and CNBC, and his writings have appeared in hundreds of publications such asthe Wall Street Journal, Detroit News, Washington Times, and National Review.
© 2021 Stefan Gleason - All Rights Reserved
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