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Gold’s decline is temporary

From Jeff Clark, Editor, Jeff Clark’s Market Minute:

The price of gold has had a tough few weeks.

Gold peaked above $1,360 per ounce in late January. On Friday, the yellow metal closed at $1,323 per ounce. That’s a decline of almost 3% in just over one month.

Of course, that’s nothing compared to the 6%-plus drop in the S&P 500 over the same time frame. But gold is supposed to be a safe haven. It’s supposed to be the asset into which everyone runs when they’re fleeing from everything else. And, in that job, gold has been disappointing.

But that disappointment is temporary. The price of gold may still have a little more downside left in it. But by the time 2018 comes to an end, I expect gold will be trading much higher than where it is today.

Take a look at this weekly chart of the price of gold…

Weekly charts are long-term charts. Patterns on this time frame usually take several months to play out.

This weekly chart of gold shows the price tracing out an ascending triangle pattern. This is a bullish pattern where the chart makes a series of higher lows while running into the same resistance level. Most of the time, this pattern resolves by breaking out to the upside and accelerating higher.

There is room for gold to work slightly lower over the next few weeks. The price could decline to the rising support line at about $1,285 – which lines up well with the 50-week moving average.

Notice, though, that all of the various moving averages are in a bullish configuration. That means the 9-week exponential moving average (EMA) is above the 20-week EMA, which is above the 50-week MA. It’s rare to see strong declines occur with this setup.

It seems far more likely, to me at least, that any further decline in the price of gold is likely to find support near $1,285. Then it will start the next rally attempt. And, should that rally push gold above the resistance line at about $1,365, it should kick off a longer-term bullish move towards the $1,580 level.

It has been tough for holders of gold as a safe haven to watch the price decline over the past several weeks. But that decline is temporary.

Gold is likely to be much higher by the end of the year than where it is today. Traders should take advantage of short-term weakness to buy intermediate-term positions.

Best regards and good trading,

Jeff Clark

Crux note: No matter which direction the markets go, Jeff Clark’s Market Minute subscribers are always up to date on the trends taking shape – and the best ways to profit on them – hours before the opening bell rings.

Sign up for the Market Minute for free right here… and get your next issue at 7:30 a.m. sharp tomorrow morning.

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