Gold's been volatile since the federal government locked its doors on Monday night. Do feel the difference? Anyway, after pulling itself off of its 52-week low, Atomic Number 79 has been rollercoastering it lately.
So what's the deal going forward? Let's do a 3-T examination to get a sense of what's next for AU.
Our first inclination is that gold's chart favors downside more than upside for a couple of reasons.
The metal has made a series of lower highs and lower lows after peaking in late August. That's called a downtrend.Gold is in a descending channel.The 12-day average has moved below the 26-day average, and both recently fell underneath the 50-day.The MACD line has moved under zeroAnd, we see a gold potentially tracing the right side of a triangle, which could AU back to its 52-week low.iStock would take a more positive view if gold were to rally beyond the upper channel trend line. We'd view that a potential breakout and would anticipate that yellowish metal would challenge August's high.
The following chart suggests that gold is likely to move higher before attempting to trace out the right side of the triangle we mentioned. As you can see, despite a strong Wednesday, gold remains more than one standard deviation below its normal trading range. This oversold condition has happened four times since mid-April and #79 has eventually rallied afterwards every time. Our guess is that gold will run to 1,340 to 1,375, which will put the top edge of the channel at risk.
Finally, momentum has begun to reverse course and appears to be headed higher. There is some immediate resistance overhead, so 'mo may have a difficult time building momentum.
Overall: The composite pic! ture of our 3-T look leads iStock to believe that gold will likely press forward to $1,340ish and then back off and stay within its descending channel; following the right side of the triangle.
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