With this week’s close above $1,835, gold hurdled its initial downtrend.
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Gold is ready to shine again.
The last column I wrote about the precious metal (“Gold Is Bottoming Out. Why You Shouldn’t Buy It Yet”) appeared on Oct. 14. I noted the importance of the $1,680-an-ounce support gold held after declining from high of $2,075. And I wrote that spot gold would confirm that an important bottom was in place once it closed above $1,840.
In my Institutional View report to clients, I updated my analysis to write that gold’s price action would turn bullish on a close above $1,835 and lead to a test of $1,880 (its November recovery high). In the weekly chart below, you can see that since March, gold has maintained a series of higher lows. Even more important, note the many positive volume swings and bullish key reversals. With this week’s close above $1,835, gold hurdled its initial downtrend.
From here, $1,880 is the critical level to overcome. A close above that level would mark the first time that gold surmounted a prior high since it declined from its $2,075 peak. And overcoming a prior peak would represent a clear change in its vital signs.
Perhaps even more important, gold closing above $1,880 would be a major breakout above a 15-month downtrend. It would be a signal to add to positions because it would generate upside projections to test final strong resistance in the $1,950 area. And breaking out above a 15-month downtrend would attract more buying from trend-following algorithmic traders.
Now is the time to begin initiating long positions.
Andrew Addison is the author of The Institutional View, a research service that focuses on technical analysis.
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