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Gold's Tortured Progress

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I frequently use the word "tortured" when discussing gold because so much of the time any progress it makes comes with great pain and suffering. In August GLD broke above the resistance line drawn across the 2011 price top. It was a decisive break, meaning that the breakout was likely to hold, and that the rally was likely to continue. But, no. Instead, typically, it broke down and began a corrective phase that may or may not have run its course.

A rising trend emerged from the November low, but unfortunately, it began retreating from the mid-November top, forming a bearish rising wedge. Since reaching the rising trend line, GLD has been hugging the line rather than moving back to the top of the wedge, so we should expect breakdown soon. If the potential of the current rally is to be fulfilled, GLD will need to find a bottom somewhere above the November low.






While I lead with the ETF candlestick chart, I like to follow the continuous contract futures chart, because, let's face it, we don't think of the price of gold as being whatever the ETF price is. The current rally still looks plausible with the PMO rising off a bull market oversold level. Sentiment is still solidly negative, which is bullish.



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In the weekly time frame, the correction presents as a bullish falling flag formation, which has permitted the weekly PMO to correct down from extremely overbought levels to modestly overbought levels.

 

The monthly chart shows that gold has broken down from the parabolic advance off the 2016 low. There is potential for gold to return to the basing area between about 1000 and 1400, but that seems unlikely at this time.


CONCLUSION: Gold is going through a corrective phase to relieve the tension of a near-vertical price advance. A new rising trend is evident on the daily chart, but the rising wedge promises some amount of grief as part of the transition from a correction to a new leg up.



Technical Analysis is a windsock, not a crystal ball.


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Carl Swenlin
About the author: is a veteran technical analyst who has been actively engaged in market analysis since 1981. A pioneer in the creation of online technical resources, he was president and founder of DecisionPoint.com, one of the premier market timing and technical analysis websites on the web. DecisionPoint specializes in stock market indicators and charting. Since DecisionPoint merged with StockCharts.com in 2013, Carl has served a consulting technical analyst and blog contributor. Learn More
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