Technical Analysis of Gold
When the price of gold briefly touched $1,921 on 6th September 2011, most analysts believed that it was on its way to $2,000 per fine ounce. It was higher than the previous peak of $1,911.65 we saw on 23rd August 2011, which supported this view. Later that same day, however, it slipped back to $1,875.10 and we have not seen anything close to $1,900 since.
Fundamental analysts would insist that a gold price of over $2,000 is very likely in the not so distant future. The Euro-zone crisis and continued financial economic and financial problems in the USA seem to support this view.
From a purely technical point of view, we are currently in a medium-term bull phase; see Fig 2.13(a), in this regard. The price is well above the Ichimoku Kinko Hyo cloud and the green Chinkou Span line is higher than the price of 26 periods ago, showing that since the end of December 2011 the bulls have had the upper hand.
In the past few days we have, however, seen some weakness and the current price is well below the recent maximum of $1,762.85 we saw on 3rd February. The price has also dropped below the red Tenkan Sen line, confirming that a correction is underway.
We are a long way from where we can advise a short trade, however. For this, wait for a clear break below the Ichimoku cloud. For long trades it would be prudent to at least wait for one or two closes above the recent maximum of $1,762.85.