The Mindful Investor

The Bullish Case for Gold

David Keller

David Keller

Chief Market Strategist,

While gold has not done much in 2022 in terms of absolute returns, the SPDR Gold Shares (GLD) has indeed outperformed the SPDR S&P 500 (SPY) by about 11% year-to-date. Why has gold not done better as a safe haven? It's all about the U.S. dollar. 

First, let's review gold's role as a "safe haven" during bear market phases.

While gold has struggled in absolute terms, it has handily outperformed the S&P 500 Index ($SPX) year-to-date. GLD is down about 4% in 2022, while SPY is down 15% over the same time period.

If you had informed me at the end of 2021 that 2022 was going to be a raging bear market for stocks due to concerns about inflation, I would have told you that one of the surest bets would be gold. Gold is often considered one of the best inflation hedges around. So why has gold not been a better safe haven while equities have been in a consistent bear market phase in 2022? Quite simply, the strength in the U.S. Dollar Index ($USD) has prevented gold from fulfilling this traditional role.

Every month in 2022, the $USD has made a new high for the year... until October. The $USD has now made a pattern of lower highs and lower lows over the last six to eight weeks, indicating a potential change in trend. The relative strength index (RSI) for the $USD has now dipped below the 40 level for the second time in 2022. This move below RSI 40 may indicate a "change of character" from a bullish primary trend to a bearish primary trend. This short-term weakness in $USD has provided space for risk assets like equities and commodities to reverse their recent downtrends and push to the upside. Further weakness in $USD would allow risk assets, including commodities, to push higher.

For now, I'm watching the 105 level for $USD. That represents a 38.2% retracement of the May 2021-September 2022 uptrend and would be a reasonable downside objective given the recent weakness.

So what's next for gold?

As the RSI for $USD has dipped below 40, indicating a new bearish phase is likely, the RSI for gold has pushed above the 60 level after spending most of 2022 below this level. That suggests a bullish primary trend as upside momentum has expanded.

The next upside target for GLD, using Fibonacci retracements, would be around $167, which is just 1.5% above Friday's close. The 200-day moving average lies just above that level as well. If those resistance levels are violated, we could see further upside to the 61.8% retracement level to around $177.

In terms of spot gold, that would suggest resistance in the $1800 range, with the next upside target around $1900/oz.

2022, up until October, has been all about rising interest rates, a stronger dollar, and falling risk assets. If the seasonal tendencies hold up going into year-end, we may be facing a bullish run with gold in the driver's seat!

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David Keller, CMT

Chief Market Strategist

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

The author does not have a position in mentioned securities at the time of publication.   Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

David Keller
About the author: , CMT is Chief Market Strategist at, where he helps investors minimize behavioral biases through technical analysis. He is a frequent host on StockCharts TV, and he relates mindfulness techniques to investor decision making in his blog, The Mindful Investor. David is also President and Chief Strategist at Sierra Alpha Research LLC, a boutique investment research firm focused on managing risk through market awareness. He combines the strengths of technical analysis, behavioral finance, and data visualization to identify investment opportunities and enrich relationships between advisors and clients. Learn More