Gold – 6 Mar

Paper gold spanking part two has brought price down to the 200 day moving average where buying support materialized. This is as it should be because the 200 day moving average and price rarely have met in the last 11 years. The odds of it staying below the 200 day MA are very small and would require a paradigm shift. Some day there will be a collapse of paper gold and price will descend below that key moving average and never will it return. Is the time now for the demise of paper gold? I cannot say, only that it is going to happen at some point with no warning whatsoever. Physical gold holders will then be richly awarded for their superior decision making and patience.

Strong chart support lies just below current price around 1670. Beyond there, not much remains as support on the daily chart until the recent major swing low at 1523. Longer term charts offer a better a view of where we may be headed. Resistance is coming from both the 45 and 100 day moving averages around 1700 and former chart support just below 1720.

The expanded daily chart offers the possibility of chart support around 1625. I think this is a real possibility. I have accumulated plenty of dollars that I am sure will be gladly exchanged for physical gold. I plan on taking that trade if we can 1600 in price. If we can see 1523 again on the chart I will be trading as many future dollars as I can get my hands on. I am sure there will be a bank that likes that trade, they get a commitment to pay from me and I get physical gold that will be in my hand regardless of what happens in the future. I smile just thinking about it! RSI has room to fall further before being technically over-sold.  Stochastic is simply over-sold. If I were a betting man, 1600-1625 will likely be it for this time around.

The weekly chart shows the lower boundary of the trend channel around 1625 and corresponds quite nicely with support on the previous chart. An intra-day overshoot could easily take out 1600 on a reversal. I will be buying there. The lower Bollinger band is currently at 1568 which appears to be worst case scenario barring paradigm change for traders of paper gold. I would characterize it as best case scenario for buyers of physical ounces, a true gift if it materializes. RSI is back at long term support just under 50. A slight overshoot could allow price to fall to that important 1600 -1625 area.

The big weekly chart shows a drop to 1600 would just meet up with the current trend line. Interestingly, a Fibonacci 38.2% retrace lies around 1450, only 75 below the big swing low to the trend line a few months ago. This long term trend line is very strong and has held multiple times since the 2008 low. Again, my friend 1600 looks to be as far as price will likely go. In case anyone missed it, I will be buying big time at that level with my hard earned money. Below that level, I will be using someone else’s not so hard earned money to buy physical gold.

The last chart is the monthly. What a beautiful chart it is! RSI is approaching support and this level has held the entire time except a brief undershoot during the 2008 debacle. Further, the 18 month moving average has held all but during the 2008 collapse and currently lies at 1565. This suggests to me that a move back to 1523 is highly unlikely. Again, my friend 1600 looks to be as good as it gets for a physical buyer. Stochastic has already reversed at support and says we might not even get a shot at 1600.

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