Medium to Long Term Technical Analysis of Gold
Gold has technically been in a bull run ever since it broke free of the Ichimoku Kinko Hyo (see fig 5.11) in mid-February. There was a relatively large correction at the beginning of March – enough to send the price below the blue Kijun Sen medium term average. The price subsequently recovered and ended at a new high of 1562.05 on the 29th of April.
On the 2nd of May it briefly touched a high of 1574.95 before starting to decline. It dropped as low as 1462.25 on the 5th of May before recovering somewhat. At the time of writing, the price is hovering around 1498.
If we look at Fig. 5.11, gold is still technically in a bull market. The green Chinkou Span line is still well above the price 26 periods ago and the price is also still trading above the cloud.
The fact that the price has dropped below the blue Kijun-Sen medium term average, however, shows us that a price correction is on the way. A return above the red Tenkan-Sen line could indicate that the bull market is intact and that we can expect new highs.
Should the price increase above the recent high of 1574.95 again, traders will have even more confidence that the bull market is intact.
Except for day traders, who trade in shorter term movements, it’s too early to look at short trades right now. The price must first at least enter the Ichimoku Cloud, or preferably break out downwards.
The forces driving the gold price are still in place: uncertain economic times, a decline in the dollar, political unrest in the MENA region and uncertainty over the credit worthiness of some emerging economies. Everything else remaining the same, it is unlikely that we will soon witness a major downturn in the gold price.
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