Divergence in Gold

Gold has been on a tear recently, participating heavily in the ‘risk on’ rally thanks to the Fed. I now see a divergence in gold from two momentum indicators that could be trouble for the rally to continue. We last looked at gold on when it was up against resistance on August 22nd, the shiny metal was able to break past the noted resistance and continue higher. Will gold be able to do the same thing with the current technical setup?

Currently, we have a slight divergence in the slow stochastic indicator, as it makes a lower lower and lower high as gold continues its advance. RSI is also diverging, moving sideways over the past few trading sessions as it stays above 70.

On the other side of the coin we have very prominent investors like Ray Dalio, who runs Bridgewater Associates, calling for all investors to be invested in gold to some degree. These types of statements can be strong tailwinds for the metal and could power through these momentum divergences.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+.

 

About Andrew Thrasher, CMT

Andrew Thrasher, CMT is a Portfolio Manager for an asset management firm in Central Indiana. He specializes and writes about technical analysis as well as macro economic developments.