A Golden Breakout

It appears gold is finally breaking out of its pennant pattern on what seems to be fairly strong volume. With the price of gold closing yesterday above falling resistance, we also see it has hit the resistance on RSI and every so slightly broke past the top trendline of the channel I’ve drawn on the On Balance Volume. From here we will be watching if original resistance trendline will become support on any future weakness.

One important note to keep in the back of your mind when evaluating commodities like gold, is the upcoming FOMC meeting. If the Fed does not give any additional hints or announcements of further QE, gold could see some weakness on the lack of additional easing..

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

Andrew Thrasher 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.

  • Peter D

    Andrew, have some kids, then you will see who rules your life

    • No kidding! But until then Brooke and Abby are doing a pretty good job haha.

  • MM

    Gold will inevitably crash through all resistance and the notion of its relationship to QE. We will see gold at prices never dreamed possible as the dollar loses its buying power. What is taking place is a Currency War and the need for liquidity based on physical assets NOT the mere confidence of a failing fiat currency. The rest of the world is losing confidence in the dollar as the reserve currency seen by record gold demand by China, India, Japan, Russia, the baltic nations, Mexico, Brazil and many others. Gold is the only material that carries no counter-party risk. Furthermore, the fact that the Federal Reserve is the net largest buyer of US treasuries at 61 % of all purchases since dall 2010 and that yields are at record lows is proof enough that the dollar is doomed. Gold should not be looked at as an investment rather it is a hedge againxs inflation and a preservation of wealth.

  • Hi!, Andrew & Patrons Et Al:

    Gold is just as fickle isn’t it? Gold goes up; the $ goes down keeping everyone’s purhcasing power even though lobsided?


    • Russ,
      You are half right. While gold and the dollar are negatively correlated they do not have a correlation of -1. Look at this chart which shows the performance of the U.S. dollar and gold in the top panel and the 60-day correlation of the two in the bottom panel. http://scharts.co/QOjIf2
      Does that help answer your question?

  • bert

    for months now guys like you have been saying in effect ” gold COULD”. such empty words!!!

    • You won’t see me make absolute statements on this blog for a reason. No one else nor myself KNOW what the price of a security will do. I don’t write to tell people how to invest or when to buy and sell. I created this blog to group my thoughts and share with the investing community what I’m noticing as it pertains to technical analysis.

  • money100

    I have been invested in gold and gold stocks for almost 1.5 years. In all that time, I was only profitable on two breif occassions.
    I am also in the camp that has had it as to prognosticator forcasting big numbers, in some distant and not so distant futures.
    Each day I begin to think if gold ever did soar to this lofty predicted price per ounce, would we be better of, after all, when you sell a stock, they just give you back worthless paper? Keep the stock so your returns look good until it sinks again?
    Not much of a benefit.

  • Ross Hocker


  • a_obama

    Gold will crash 2000$ mark before March 2013 no matter what happens.

  • i believe gold is on the upswing. everyone knows the dollar is not worth the paper it’s printed on. the government and central banks have tried to manipulate the price of gold, but we all know that the dam is about to burst due to the flood of excessive spending and debt. after nov. 6th, see what gold will do! it’s inevitable.

  • Leland Sprague

    Gold is both a hedge and a psychology. If Obama wins in November it will shoot up to 2000 and perhaps beyond: if Romney wins it will go down to the 1250 range. In any case ten years from now it will be double, triple, or more the present price. We just cannot predict exactly when this will occur. The question then is only , as usual, whether you can beat that inflation with returns from solid companies that will be profitable in all weathers. If you successfully do this through one strategy , or the other, will you be able to prevent others or your own government from stealing it from you?
    Good luck and have a nice decade. Leland Sprague

    • There is no intelligent way you can prove what you’ve just say. I’m not trying to argue with you but making a statement like “it will double, triple, or more” is nothing more than a guess with no foundation.