Technical Analysis of Gold
The turmoil we have seen on world markets during the past few months has certainly started to cast doubt on whether any current word currency can actually be regarded as a relatively stable. The Euro for one has not been doing well lately and the dollar is not much better off. This has sparked renewed interest in Gold as the final save haven for battle weary investors.
If we look at Fig. 11.11(a) we see that it reached a record high of 1,921 on the 6th of September, a time when many traders thought it was heading for 2,000. However, since then we have seen large-scale profit taking that caused the price to briefly touch a low of 1582.75 on the 29th of September 2011.
The lingering Euro debt crisis did not go away, and since then we have seen a renewed surge in the Gold price. On the 25th of October, it broke through both the blue Kijun Sen and the Red Tenkan Sen lines and soon afterwards, it also broke upwards out of the Ichimoku cloud.
After reaching a maximum of 1 798.15 on the 7th of November 2011, we have recently experienced a few down days, but this is probably more the result of profit taking than anything else.
Currently the price is above the Ichimoku cloud. The red Tenkan Sen has also broken out of the Ichimoku cloud and the green Chinkou Span is well above the price of 26 periods ago, all confirming that we are in a bull market right now.
Having said that, a cautious trader would wait for a new high above the 1 798.15 level before entering a long trade. Short trades are for day traders only right now, who can cash in on short-term corrections like the one we saw over the past few days.