Two quick charts to note some developments in gold.

The first is of the metal itself. 

Click Chart for Large Image

A couple of things worth mentioning. First of all is the CLOSING push past the 100 day moving average. That will attract the technical or chart-based trading funds. If they are short, they will cover; if not long, some will come in on a signal like this.

Secondly – the price closed above the first level of chart resistance noted down near the $1225 level or so. That is the best CLOSING price in over one month.

Also, the price managed to push into, but not through so far, the second resistance zone noted on the chart. That extends up to $1240. A push through that level that can stay above it, should allow the market to make a run at $1250. Clearing that would be a big deal in my view as it would open the potential to run at least another $25 higher to the area near $1275 and possibly even $1290-$1300.

Also, the RSI has now finally moved through the key 60 level, something it has not done since July of last year. If the RSI can extend higher tomorrow or the next day, and actually get above 65, this recent move higher would have to be respected as having some more upside potential.

Personally, I am still not excited about gold based on my current view of the fundamentals as I see little reason to own it for any sort of decent returns in the long term, but in this environment in which stocks are wobbly right now and interest rates are falling, it is definitely attracting safe haven flows as is witnessed by the falling yield on the Ten Year Treasury note and the move higher in the long bond ( as well as Yen strength). In other words, while the intermediate term chart, the weekly, looks poor, the Daily chart has definitely improved. Short term I see nothing on this chart to induce me to be bearish its prospects for the current time being – yet…

That being said, one cannot fight the tape and expect to win so if you are short, keep a close eye on this as a fairly good contingent of short positions are covering right now.

One of the other positive factors for the metal at the moment is the strength in the gold shares. The HUI looks very impressive on the chart right now, again, the DAILY CHART. It too has cleared its 100 day moving average, something which it has not done since September of last year. Also the 50 day is turning higher.

Note that there is what appears to be a solid band of resistance over the market near the 200 level. That will be a bit test for the bulls in my view.

Switching out to a longer term view ( intermediate or weekly chart), the index has pushed past the top of the first resistance zone noted on this chart. That extends back to the December 2013 /October 2014 lows. If the HUI can maintain its gains until the close of trading this Friday, it stands a good chance of moving higher and possibly making a potential run at 200-210.

I should note however that on this longer-dated time frame, the RSI is currently showing a BEAR MARKET RALLY is occurring at this point. That is because the reading is well below 60 ( currently near 52). As you can see from looking across at the indicator, it has not been above 60 since October 2012!

The MACD is positive reflecting the bullish view but the reading is also quite depressed even though it is indeed in a bullish posture. I have drawn in some dotted/dashed lines in orange on that indicator to give you some examples of what the MACD looks like when it is reflecting some bullish readings. I try to combine these two indicators to give me a sense of the strength of any market move. Back in September 2012, the MACD was strongly bullish and the RSI has moved above 60, reaching to 67 at that time, giving the possibility of a resumption of the bull move. Note how quickly the RSI fell back below the 60 level. It was only a few weeks later that the MACD threw off a new SELL signal. The market then proceeded to implode lower.

That is the reason one wants to employ a few good indicators ( I have not even included the ADX/DMI on this chart) along with various horizontal support and resistance levels, to analyze a market. As far as I am concerned at this time, until the WEEKLY RSI can register a reading above 60 in this market, this appears to be nothing more than yet another move higher in an ongoing bear market in the gold shares. Short term (Daily chart) the HUI is promising; longer term it is not. Not yet…

I will make this comment and leave it at that… some of the readers are still holding large numbers of mining shares in their portfolios from having bought them a few years back at the height of the gold bug “the sky is falling” hysteria. I would watch this intermediate term chart very closely if you are considering lightening any of that load and trying to salvage what is left of a financial disaster that occurred in these shares. Right now, at this moment, there is still upside momentum on display. Keep a close eye on that because if that momentum changes to the downside and the rise stalls out, it might present you with an opportunity to sell some of your holdings in this sector and set aside some cash to buy into a different sector later on these next few weeks/months. Don’t try to predict anything – just watch the price action carefully and buy and sell based on what you see in the price chart action.

The reason I bring this up is that I know from emails in the past that many, many readers of my former site had swallowed the propaganda from the gold perma bulls and loaded the boat on gold mining shares. Having watched their financial net worth devastated as a result of listening to those Johnnie One note hucksters, they are now stuck with large holdings of the things in their portfolios. If the market gives you a chance to sell some of those losers at a better price AND IF YOU believe you are overloaded in gold shares, then watch the current rally closely as it may be just what the Doctor ordered for you to relieve some of your pain in there.

I remember how stunned I was to first learn that some of the poor victims of these gold shills sold every stock that they had while waiting for the “any day now market crash” and took the entire proceeds and put them into gold shares! The  results of that were of course horrendous. I know of two instances in which marriages were ruined as  a result of this sort of “bet the farm on a sure thing” crap.

The lesson in this is hard but simple – when trading or investing PRECIOUS INVESTMENT CAPITAL DO NOT listen to emotional or fear-based ideas. Instead, do your own analysis and STUDY THE PRICE CHARTS. You will never go wrong by listening to what the market tells you.

That goes for anything yours truly here might tell you! Like any other trader, I have my own idea of what a market should be doing from my understanding of the fundamental factors that impact it. Guess what – I can be wrong as well! We all can. That is why it takes humility and a lack of ego when trading. Admitting you are on the wrong side of a trade or investment is incredibly easy unless you have an ego problem. If you are wrong, GET OUT! You can always get back in but not if you have lost all of your money by refusing to admit that the market is not confirming your opinion towards it.

http://traderdan.com/

The current trendy reason for the mainstream to dislike Gold is strength in the US Dollar. On the surface it makes quite a bit of sense. Gold is priced in dollars. Dollar strength automatically pressures the Gold price. However, this popular view reveals a total lack of introspection. Since the end of 2013 Gold is essentially flat (positive by a fraction) while the greenback has gained a whopping 14.9%. Better yet, since Gold’s early November low it has gained 6.0% even while the US$ is up 5.8%. This type of relative strength within the context of an aging bear market may be another sign of a major trend change brewing under the surface.

Gold has a history of leading the buck at important lows. It makes sense because if Gold is going to rebound strongly it should do so in real terms and not just as a mirror of the buck. The chart below plots weekly line charts of Gold and an inverted US$ index. In blue we plot important bottoms in Gold with the corresponding bottoms in the inverted US$ in red. Note how Gold started to rebound at least a few months before the inverted US$. We should also note that during 1976 Gold bottomed in August while the US$ didn’t peak until December. 

Turning to the present, Gold is on the cusp of a mini breakout but we’d really like to see it show more strength against equities. We’ve recently noted that Gold has broken out to a 16-month high against foreign currencies and a 17-month high against commodities. Yet it has remained weak against global equities.

Below we plot Gold, Gold against the S&P 500 and Gold against the MS World index (world excluding the USA). If Gold can push above $1220 in the coming days then it could rally up to $1270-$1280. Gold is very close to an important breakout against global equities (ex USA) but still has work to do against the S&P 500.  

Though Gold has been flat over the past three months it has quietly gained important relative strength. It recently touched a 16-month high against the Euro and a 17-month high against commodities. It has rallied even as the US$ has rallied. These are some very positive signs that hint that the worst could be over. In my opinion, the last thing Gold needs to do for bulls to win the argument is break its downtrend relative to the S&P 500. That negative correlation has killed Gold throughout the bear market and a reversal in favor of Gold would be very significant. We are long select juniors as we believe at worst, a decent rebound in the sector has begun. Time will tell if it evolves into a new bull market. Consider learning more about our premium service which includes a report on our top 10 juniors to buy for the coming bull market.   

Good Luck!

Jordan Roy-Byrne, CMT

Jordan@TheDailyGold.com

There is an old market saying, “As January Goes so too the Year”. Tensions between Russia and the West continue to push precious metals higher, while the equity markets such as the Dow and S&P500 are crashing. Gold climbed back above the critical $1200 mark. Once again the Greek debacle is coming back to haunt markets as investors fear another decline in the Euro. The Dow was down over 300 points yesterday as investors are beginning to brace for uncertainty from a declining oil price pushed down to punish Putin and his friends.

As expected the end of tax loss selling should support a rally in the beaten down junior miners. We could witness a powerful January Effect where the small caps outperform. A break above $1240 in gold could really ignite renewed buying across the sector.

Larger Image

Investors should specifically watch out for breaks of critical moving averages such as the fifty day moving average (50 DMA). A break above the line indicates a potential change in trend. The junior gold miners (GDXJ) have broken above the 50 DMA for the first time in four months. This is happening in January which is usually a sign for a positive year. This means the probability of a change of trend has increased. Confirmation of a major bottom would be a break of November highs at $30.

Now until at least March when PDAC begins in Toronto is a very favorable season to watch the junior mining stocks.

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