ChartWatchers

GOLD HITS $500 AND RESISTANCE

Chip Anderson

Chip Anderson

President, StockCharts.com

On December 1 New York spot gold closed at $502.30, slightly exceeding a target long awaited by gold bugs, but $500 is also a level we technicians have for a long time identified as a long-term resistance level. Could it be that the cyclical bull market in gold has come to an end?

Strictly speaking, we can't say for sure that the secular bear market in gold is actually over yet. As you can see by the chart, gold has more or less maintained a trading range since 1983, whereby it worked off the excesses of the prior bull market that took prices to $850. So far it has not decisively broken out of that trading range, therefore, we cannot conclude that the long-term consolidation is over.

Nevertheless, I believe that the bear market low was made in 1999, and that the rally from the 2001 retest low is the beginning of a secular bull market; however, it is still likely to take some time before gold can move significantly higher and put the trading range behind.

The rising trend channel I have drawn on the chart reinforces the overhead resistance and offers some perspective regarding the ebb and flow of prices. While the bull market is likely to continue, it is also likely that prices will soon pull back and consolidate. This process could take up to a year or more with correction lows around $450. I also think we could see prices as high as $530 before the correction starts.


Chip Anderson
About the author: is the founder and president of StockCharts.com. He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. Since 1999, Chip has guided the growth and development of StockCharts.com into a trusted financial enterprise and highly-valued resource in the industry. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at StockCharts.com, and provides updates about new features or additions to the site. Learn More