Gold is on the rebound with a close back near the 1770 level and gold up again over 10 in the pre-market this morning. Resistance is the all time high at 1817 with support at the new swing low of 1725. That swing low has established another higher low and the up trend remains intact. We want to see 1725 hold on subsequent swing lows to maintain trend. Further and stronger support comes in lower at 1683 comprised of a previous swing high and the Fibonacci 38.2% retrace level. RSI continues to build a mountain range above 70 and remains over-bought. Stochastic has technically lost the embed above 80 with a current reading of 74 that yields an initial target of the 18 day moving average if the correction continues, currently at 1672 but climbing rapidly to the strong support level at 1683. A close today above 1770 puts 1817 back into play.
The 1 year chart clearly shows the long term trend and pattern set in gold where a stair step advance is taking place. This last move is more vertical than others and has broken from the trend channel, clearly reinforcing what we know about the fundamental picture for gold as sovereign debt problems loom throughout Europe and the Bernank’s guarantee that interest rates will remain zero forever.
My favorite 100% allocated gold fund, PHYS, has a big day up and closed very near all time highs and essentially at resistance of 15.62. The fund is currently trading at 3.93% premium to net asset value (NAV). Support lies at the latest swing low of 14.93. This swing low made another higher low and the up trend remains in place. Further natural Fibonacci support lies dead center in the breakaway gap at the 38.2% retrace of 14.53. Unlike spot gold, this chart has not lost the embedded stochastic with current reading still above 80. The embed signifies continuing and accelerating upside momentum rather than just an overbought condition. The embed requires 3 consecutive closes above 80.
The longer term 1 year chart shows that this fund is up 50% in the last year. Not too shabby.