E Has Gold Broken Out Or Not? Technicals And Fundamentals

A casual glance at the latest short term chart for GLD would tend to support the notion that, yes, gold has decidedly broken out of its trading range and is headed higher.

Below is a two-year chart of GLD (bigcharts.marketwatch.com) with the latest activity updates...

 

Now that we are all on the same page, let's step back a moment and ask a couple of questions.  What happens next? And, if this is "the big one", how high might gold go?

Some analysts are pretty quick to point out that this move was expected and is "only the beginning" of much higher prices for gold. They and others also point to expected huge increases in inflation and the signs of a recession as fundamentals that support higher gold prices.

Some think that a collapse in stock prices is imminent and will confirm what they already know. Or worse, that another credit collapse is coming. And, when you throw in political turmoil, social unrest, trade wars, and world wars, well, you get the picture. Everything seems to lend support to the expectation of higher gold prices.

There seem to be a plethora of fundamentals that support higher gold prices. But do they?

Before we answer that, let's look at another chart. This one is a ten-year chart of GLD prices...

In looking at this chart, it seems clear that GLD has been contained within a reasonably narrow range, bounded by 105 on the downside and 135 on the upside, over the past six years.

So, let's ask again, "Has gold broken out or not?"

I don't think anyone can say yes, decisively. Some further sustained price action on the upside is necessary before a conclusive call can be made.

If you are a super-bull when it comes to gold, you might be wondering why the short-term charts look so much more bullish than the long-term charts. There are two reasons.

The first is that the short-term charts use daily prices for plotting purposes, whereas the long-term charts use weekly prices.

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Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN'T, AND WHO'S RESPONSIBLE FOR IT and  more

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Dan Richards 3 weeks ago Member's comment

What happens if the US dollars ends up dropping significantly more. It had a bad week last week.

Kelsey Williams 3 weeks ago Author's comment

If the US dollar continues to decline, then gold prices will reflect that by moving higher.

Carl Schwartz 3 weeks ago Member's comment

True, the Us dollar fell against all the world's currencies last week: talkmarkets.com/.../greenback-breaks-down