I don’t often make market calls or indicate when to buy or sell, but…if you have been waiting to buy gold, or have a dollar-cost averaging strategy in play, today served up a very compelling buy signal for gold.
For years, I tracked and traded the gold futures market very closely, and over time I discovered that charts alone were insufficient to provide a useful trading edge; I had to incorporate another set of market indicators, which I'll get to below.
First a chart of gold:
By this view, gold has been tracing out a series of pennants, and each time, it busted out to make new highs. Where the prior pennants were relatively modest affairs, this most recent one is far larger and far longer lasting than any of the prior ones. Perhaps that's because gold got ahead of itself back in 2011 and had to work off all of that exuberance, or perhaps someone drew a firmer line in the sand and said "no more."
The implication is that breaking up and out of a bigger flag implies a bigger run. Of course, gold could break down from here, but with everything going on in Europe and the likelihood of QE X, and maybe even a crash landing or two in Asia, the odds of that seem rather remote.
As a final point about the above chart, notice the intense support for gold that exists between 1500 and 1550.
by jim-h-2