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Is this the healthy correction gold bulls were waiting for?

The answer is “YES!”

Shares of the U.S. Gold Fund (GLD) just delivered one of the rarest - and most actionable - signals in technical trading: a clean, crowd-supported pullback to the 20-day moving average.

After a massive run that sent GLD shares more than 55% higher over the past year, the ETF just posted a two-day 8.5% drop, a move that’s only happened 11 times in the last 20 years.

That alone is enough to raise eyebrows. But here’s why this dip is different.

A Perfectly Timed Technical Setup

Gold is one of the most widely followed assets in the world, and that matters.

Lesson one of technical analysis is that price patterns and analysis work best when everyone is watching.In other words, a stock or ETF that is thinly traded is less likely to react to technical analysis “signals” or indicators.Think of a tree in the forest that nobody hears fall.

In Gold’s case, the “crowd” has grown to historic levels as investors – professional and retail - look to protect their portfolios and wealth.The fact that gold is now on so many investor’s radar means that the effectiveness of technical analysis and “signals” on gold has been increased.

In other words, you can’t afford to ignore gold’s technical signals.

That said, the recent selloff of the U.S. Gold Fund (GLD) shares landed them exactly on the 20-day moving average, what I call the “Trader’s Trendline.”

This short-term support line is where momentum traders typically wait to re-enter strong uptrends. That bounce confirms short-term buyers are stepping back in, signaling a potential continuation of the trend.

Let’s look at why gold’s trend is set to continue.

(Click on image to enlarge)

Fundamentals Still Support Gold’s Long-Term Bull Case

Gold’s long-term bullish setup is backed by powerful macroeconomic tailwinds that continue to build beneath the surface of the financial system.

At the core is the unsustainable trajectory of U.S. debt.

With debt-to-GDP levels surging and deficit spending accelerating, confidence in the long-term purchasing power of the U.S. dollar is beginning to erode. Gold, as a hard asset with no counterparty risk, stands to benefit as investors seek shelter from a weakening fiat regime.

De-dollarization trends are gaining momentum globally.

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