A Crucial point for GOLD (XAU), Will we break 5year resistance?Gold is bouncing around near an in the meantime historic resistance level (highlighted as the 61,8% Fibonacci retracement level in yellow). If we look back at the second half of 2013 (see below), we see how it tries to break through but lacks the required juice to go for the 50% level. Somewhere beginning 2014, we see a second failed attempt. The yellow-ish circles show a couple of more tests of this resistance level, making it a hard and resistant brick that by now will need a strong karate-kick in order for it to get broken.
Luckily for gold, the fundamentals of the markets are shifting somewhat, likely in favour of gold. For example, several concerns are being raised on the plausible overheating of the equity markets. I myself have also gotten the creeps of the European leading index (DAX30) chart , as well as when I was looking at the S&P500 chart . Other rationales include the high valuations in terms of P/E etc. In any case, gold has proven itself to be an interesting alternative in times of market turmoil, so fundamentally, we might have some positives going for gold.
DAX 30 Graph (EU leading index) - See how we are trading close to long term trend channel top, and (see post itself) have a double top, a head & shoulder figure, etc.)
S&P500 Graph - similar points as with the DAX30 graph:
Zooming out on the chart and looking at the weekly going back almost 15 years, we can see a clear white support line at the bottom, and another white support line that actually got broken previously. We are now trading under that level and trying to get back above.
As you can see, that big white channel resistance line is close to making a cross with the yellow 61,8% Fibonacci resistance.
Moreover, we have an ascending triangle formation in the shorter term, highlighted by the two ticker light blue lines . Therefore, we are at a rather historic moment where gold has the potential to break through , which would likely lift it up to the next target at $1489 (a 10-11ish % increase compared to current levels).
After which it would be able to propel higher.
The opposite scenario is that once again, gold fails to break through the heavy resistance, likely causing it t o bounce back to the 0.25 Fibonacci speed resistance line (the smaller whitish diagonal line).
Indicators seem to be in favour of positive momentum (MACD and RSI):
Finally, you can also let yourself be guided by the Fibonacci speed resistance line, these are quite good to work with in parallel with the horizontals, to get an idea of resistance and support areas, see the highlights in yellow:
Conclusion:
- Equity markets are showing signs of overheating, which would be quite logical after such a long bull market. My previous posts on the DAX30 &the S&P500 provide more background for those interested.
- Gold is again testing the 2013 resistance horizontal (coinciding with the 61,8% Fibonacci level). This time MIGHT be different, but remember that there are at least 2 scenario's (up or out).
- RSI and MACD show positive momentum.
- We have an ascending triangle formation.
- Several positive signals for a potential small bull run for gold, which would give an initial return of +-10% versus current levels if the first Fibo target (50% would be hit).
