If you haven’t been following gold prices lately, there’s something interesting that may grab your attention and is at least worth a second look. First, gold prices skyrocketed 10% Wednesday and then rose by a similar amount today, yet closed lower on the day. What gives? Let’s look at these developments.
First, Gold ($GOLD) on the Daily chart:
Gold prices initially violated the 200 day moving average in late July and trended sharply lower to $740 per ounce before forming a positive momentum divergence prior to the neckbreaking rally of this week. Notice the mini-bear flag that formed that in late August that truncated prior to reaching its target. These are good examples of these patterns for further reference.
Nevertheless, gold broke above the bearishly slanted (and oriented) moving averages and now hovers at possible support (from the prior swing high and the 50 day EMA). As you’ll see from the weekly chart, the 50 week EMA is currently providing resistance, though a penetration has occurred.
Gold Prices Weekly:
Though the MA orientation is still positive, the 20 EMA is not far away from a cross beneath the 50 EMA, and if price closes beneath $850 per ounce on Friday, we’ll still have the moving averages acting as primary resistance.
Gold is generally a ’safe haven’ from inflation and uncertainty, but if people who fled the stock market in fear begin to regain confidence, then we could expect to see these recent gains in gold disappear quickly (as evidenced in the stunning intraday reversal today).
Let’s see that on the GLD - the Gold Trust ETF.
GLD (Gold ETF) 5-minute:
There were a couple of price consolidations and another mini-flag pattern and buy set-ups at the rising 20 period EMA, but ultimately price ran up to form its intraday high in the afternoon and then began its gentle slide which turned into a sudden sell-off as the broader stock market indexes recovered quickly and violently. This pattern could continue into the weekend if the markets are strongly higher on Friday.
Keep in mind it’s quadruple witching, which often brings unpredictable price swings and volatility as large funds unwind and roll positions in the futures and options market as needed.
Guard your accounts!
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