Gold Seeing Bullish Momentum

On the daily price chart, it’s clear that gold topped out in March at $192 — using the SPDR Gold Trust (NYSEARCA: GLD) as a proxy for gold price — and that a low of $158 came on July 21. Since then, the metal is seeing bullish momentum as it lifts up off of the lows and blasts it way back up to the $167 level before a bit of selling came in early August.

The downtrend line that connects the March peak with the April high was hit last week at $167. Enough selling at this line caused a halt in the bounce into August from the July low. A close or two above that red-dotted downtrend line — maybe this week— would confirm that bullish momentum is being seen.

Take a look at the weekly chart for gold:

What’s revealing about looking at the weekly price chart is the way the metal clearly tested support and then bounced upward. The support line connecting the May/June 2020 lows with the March/April 2021 lows is clear. Gold tested it last week and then found buyers. It will be key for the price to remain above that line for any kind of bullish momentum to continue. So far, so good.

For the record, here’s how it looks on the monthly chart:

The red-dotted line that connects the late 2008 low down near 70 with the late 2015 low and then the mid-to-late 2018 low – it’s an uptrend. From this long-term viewpoint, the price of gold has been steadily bullish for years despite occasional ups and downs.

Here’s an old-school point and figure chart:

The benefit of viewing this type of chart is how clearly it shows the $158 level must hold for bullish gains to continue. A break below that key price support area would be a problem for those holding gold.

Gold stocks followed along with the benchmark VanEck Vectors Gold Miners ETF (NYSEARCA: GDX), peaking in early April at just above $41 and then descending along with the price of the metal to a low of $24.4 in late July. This gold stock chart is now showing a few positive divergences among basic price indicators:

Note that the downtrend line that connected the April peak with the June high has been crossed on the upside by late July. The more bullish look has continued into the month of August. Also, those positive divergences are now showing up on the relative strength indicator (RSI) and the moving average convergence/divergence (MACD), both seen below the price chart.

It’s not guaranteed that gold price action and gold stock action will continue to look better. The most recent non-farm payrolls report will have an effect on interest rates and on general market action. Precious metals investors will want to keep a close eye on the price movement for the rest of August – but the last week or two may hold promise.

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Not investment advice. For educational purposes only.

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