Why Gold Is Headed To 1550 In 2015

Gold (GLD) has experienced three years of relentless selling as equity markets have climbed to all-time highs. A general sense of doom clouds the precious metal with pundits calling for sub-$1100/oz in unison.  However, I believe the majority are overlooking the fact that gold has failed to trade lower even as numerous technical and fundamental events have presented themselves. With gold standing firm against the bearish pressures, I believe bullion will reverse its 6 month trend and hit $1550 in 2015.

Theoretically, gold should have already traded much lower given these events:

  1. Price of gold breaching below 1180
  2. USD appreciating and the Fed’s hints at interest rate hikes
  3. Oil crash

Gold price traded at 52 week lows of $1143 in early November 2014 on the news that the Fed stopped QE. The precious metal quickly bounced from these lows indicating the start of a counter trend. Gold price, in terms of foreign currencies like the Yen/Euro, is trading around 52 week highs. Additionally, Gold Bugs Index (HUI) has reached a level of long term support. These support my thesis that gold will trade higher, reaching my target of $1500 in 2015.

Gold Price Breaching $1180 – Technical Perspective

From a technical perspective, we have seen a similar setup in mid 2012-2013 when gold price collapsed from $1800 to a low of $1180 (below). Markets have been keeping a close eye on this $1180 level, waiting for a similar sell off.

Gold Price

Gold breached the $1180 support in late 2014 and many were calling for a collapse similar to what the precious metal experienced in 2013, when price fell below the original $1550 level (above). This however has not occurred as gold has stabilized quickly.

As gold resists lower prices, long term momentum indicators are beginning to show signs of reversing (below). The 100 month moving averages are creating price support at $1180. More significantly though, divergences between prices and momentum have developed. These divergences are suggesting that the bearish momentum in precious metals is slowing.

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Comments

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Joe Economy 5 years ago Member's comment

Personally, I think silver is a better investment and has been doing really well lately. In particular, I like Silver Standard Resources Inc. (SSRI) which is up over 48% this past month!. And up 5% in trading yesterday. Last year, the stock was upgraded twice by Deutsche Bank from Sell to Hold.

Derek Snyder 5 years ago Member's comment

RSI - best bet.. the miners now or waiting for gold to pullback?

Clark Winslow 5 years ago Member's comment

Thanks Patrick, what else do you recommend?

Patrick Brik 5 years ago Author's comment

perhaps a wisdom tree product

Angry Old Lady 5 years ago Member's comment

Gold will go to $2,000 where it was.

Sensible Cents 5 years ago Member's comment

Gold has already broken out vs all other currencies. USD is next.

Craig Newman 5 years ago Member's comment

No just because SNB unpegged; many forces against it still.