The gold price zig-zagged its way lanugo between August of last year and April of this one. Since then, it’s really been in a trading range and now looks as if it is breaking out.
I’ll start off by taking a squint at the longer-term picture. In that respect, Chart 1 compares the price (on a quarterly basis) to its Coppock Curve. The green-shaded areas flag periods when the Coppock is in a rising mode, a condition that, since the 1970s, has enabled gold to participate in every major rally, except the early 1977 and 2009-2011 advances. Equally as important, this technique has avoided all major declines. Despite the 2020-2021 correction, the indicator remains in a rising and therefore bullish mode. It is moreover whilom its 9-quarter MA.
Chart 2 features flipside long-term indicator, a PPO, using the 6- and 15-month parameters. This oscillator is bullish for gold when it is whilom zero (i.e. the 6-month EMA is whilom its 15-month counterpart). This tideway also captures the majority of the advances and sidesteps serious trouble. One of its joys is that it has only experienced three whipsaw signals since 1977. They have been flagged by the two red arrows and one untried one. The oscillator is whilom zero at present, but barely so. It has, though, tentatively penetrated the 2014-2021 up trendline, which could prove to be a problem should its condition worsen. The oscillator’s overall technical position is therefore still bullish, but definitely in need of an imminent rebound.
Gold vs. The CPI
Chart 3 shows that, if the price breaks to a new CPI-adjusted high, that could be a very big deal as far as inflation is concerned. That’s considering the price recently touched a trendline joining the 1980 and subsequent highs. The line’s 40-year length ways that it represents very significant resistance. From a technical perspective, a successful upside penetration would suggest that a major rally had begun. Given gold’s penchant for discounting future inflation, it would be a very worrying development. I am not predicting that it will happen, as there is insufficient vestige at present to come to such a conclusion. However, it’s certainly something worth watching.
Gold vs. Thingamabob Prices
The arrows in Chart 4 show that gold has a strong tendency to lead thingamabob prices at major turning points. The problem is that those leads vary considerably. Additionally, it is possible for the magnitude of these to diverge considerably. Squint at the relatively small gold waif in 2008 compared to the devastating withstand market that the CRB Composite experienced. It seems that this relationship is useful for predicting the direction rather than magnitude of a move. Nevertheless, that can be a very useful piece of information.
That’s where the relationship between gold and commodities comes in. For example, the arrows in Chart 5 injudicious points where the KST of the ratio crosses whilom its MA, thereby indicating that gold has started to outperform the CRB. Note that, in the vast majority of situations, these crossovers are followed by a gold rally. That was not the specimen in 1990 and 1998, nor for a short period in 2015. By and large, though, the odds favor firmer gold prices when the ratio is moving in gold’s favor. Currently, the KST is still declining, but it is starting to stabilize.
Chart 6 says that negative condition could be well-nigh to improve, as the ratio between the SPDR Gold Trust and the DB Thingamabob ETF (GLD/DBC) is right at its 2021 lanugo trendline. The gold price itself has once cleared its 2020-2021 correction lanugo trendline. The untried arrows show that similar setups, when completed by both series, were followed by a gold rally of intermediate significance.
Gold and the Dollar
Most of the time, gold and the dollar move in opposite directions. At the moment, the Dollar Index is bullish, as it is whilom its 12-month MA and its long-term KST is rising. That could be a problem for gold. Nevertheless, there are some periods when these two markets move in the same direction. When that direction is up, it simply ways that gold rallies in other currencies, but less so when expressed in dollars. That may well be the specimen currently, as Charts 7 and 8, featuring euro- and yen-based gold, have wrenched decisively to the upside.
Euro gold (Chart 7) is well whilom the untried correction trendline. It has moreover surpassed the neckline of a potential reverse head-and-shoulder pattern. The rising short- and intermediate-term KSTs suggest there is increasingly to come.
Positive momentum is moreover a factor for gold expressed in yen, as the price has completed a symmetrical triangle formation.
Good luck and good charting,
Martin J. Pring
The views expressed in this vendible are those of the tragedian and do not necessarily reflect the position or opinion of Pring Turner Capital Group of Walnut Creek or its affiliates.
Martin Pring is one of the most prominent names in the industry. A master technical reviewer and educator extraordinaire, he is the topnotch tragedian of numerous books on Technical Analysis, including Introduction to Technical Analysis and Technical Analysis Explained. The latter is now used by several international technical societies for training and for several decades was one of the three personnel books for Level 1 CMT certification with the Market Technicians Association. Translated into over 7 languages, the typesetting is, as quoted by Forbes, “widely regarded as the standard work for this generation of chartists”.