The Two Most Important Charts for Gold

The Two Most Important Charts for Gold

Despite the scaremongering…despite the uncertainty…and despite the hundreds of bullish analysts around the world telling you to buy…

Gold’s dream run appears over for now.

With the writing on the wall, gold should hit my long-standing target of US$931 per ounce in the months ahead. Lots of readers have asked me how I got that price target. And after the rally earlier this year, how — indeed if — we will get there.

Let me walk you through it.

The immediate picture — weekly chart for gold

Unlike the majority of investment bankers, stock brokers and fellow financial newsletter editors around the world, I refuse to be bullish on gold — or any resource — just for the sake of selling another newsletter.

I write straightforward, honest analysis in my paid investment advisory, Resource Speculator. And though some people seem to want to ‘shoot the messenger’, the majority of my subscribers appreciate that honesty.

Based on multiple fundamental reasons, which I’ve outlined for over three years, I’m short term bearish and long term bullish on gold. To see why, I’d like to draw your attention to a couple of charts. As the saying goes, the tape never lies!

Have a look at the weekly chart on gold below:

Source: Resource Speculator/TradingView
Click to enlarge

You have to learn to ignore the day to day news. It is just noise. The weekly chart will show you the trend. And the chart above shows that gold is not in a bull market — not even close. Despite its prolific rise earlier in the year, gold remains trapped in a major downtrend. This is shown by the blue lines.

Digging a bit deeper, gold hit major resistance (upper blue line) on the Brexit and trickled along it for a few months this year. The resistance dates back to the 2011 high of US$1,900 per ounce.

The lower blue line shows the support. It lines up with the 2011 low of US$1,307, the 2013 low of US$1,180, and last year’s low of US$1,047 per ounce. Today, the blue line stands at around the US$1,000 per ounce level. I find that level particularly interesting.

A break of the green horizontal line on a weekly closing — another major support and resistance level for the year — would confirm a move down towards the blue support line.

Don’t Buy ANY Gold Stocks Until You Read This!

The right time to buy gold stocks in 2017

Download your free report and discover why now is not the time to buy gold stocks. Simply enter your email address in the box below and click ‘claim my free report’. Plus…you’ll receive a free subscription to Money Morning.

We will collect and handle your personal information in accordance with our Privacy Policy. You can cancel your subscription at any time.

The big picture — monthly chart for gold

Now check out the monthly chart.

Source: Resource Speculator/TradingView
Click to enlarge

The monthly chart also shows you the main trend, eliminating even more noise. In other words, you don’t see the week to week volatility. The monthly chart confirms gold is locked in a short term bear market dating back to 2011.

However, and this is important, the chart above also shows you that gold is in a long term bull market. Yes, you read that correctly.

The long term bull market is shown by the green line, which dates back to the breakout in 2002. The US$931 per ounce target is shown by the green uptrend line on the monthly chart. Indeed, it isn’t a ‘made up’ number, as some sceptical readers have wondered.

Assuming that gold cracks below the US$1,000 per ounce level (shown by the lower blue line on the first weekly chart), most investors, and the mainstream financial news, should turn very bearish. Remember, last year most pundits called gold a ‘pet rock’.

The lower we go in price, expect the negative forecasts for gold to return with a vengeance.

In that case, the impact of a breach of the US$1,000 per ounce level shouldn’t be underestimated. We humans like nice round numbers. This is an extremely psychological level. I’d expect many to sell their positions instantly at that level, thinking that gold will crash even lower and never return to a bull market.

That’s the fuel needed to see a major capitulation to the downside and ultimately a major bottom.

Remember, as gold continues to fall, a lot of short sellers will start covering their positions. Short sellers aim to profit when gold falls, which is the opposite of buying low and selling high. When short sellers start locking in their profits (‘buying’ back their positions), it should support gold by providing much needed buyers near the low.

Will that be at US$931 per ounce?

There’s a good chance looking at the price technicals.

But whether it’s a bit higher…or a bit lower…I’ll recommend the best gold producers and developers inside Resource Speculator when that major low is confirmed. Those gold stocks should bank hundreds of percent in gains — or more — during the bull market.

In the meantime, I’ll keep recommending the best speculative mining stocks on the ASX. To find out more, go here.


Jason Stevenson,
Resources Analyst

Editor’s Note: Newman Show Hijacked! James Woodburn and Kris Sayce hijacked The Newman Show to discuss recent market news across Money Morning and The Daily Reckoning.

Join Woody and Sayce for an informal discussion on…Trump infrastructure spending… where the money’s going…resource investment opportunities…how far the Aussie housing market has left to run…the war on cash… You can watch all that, and more, right here.

Jason Stevenson
Jason shares his extensive knowledge of Australia’s mining sector as Money Morning’s dedicated resource analyst. Whether it’s iron ore, gold, copper or lithium, you can rely on Jason to give you in-depth analysis of the biggest and most important sector of our economy. Jason provides in-depth research to Resource Speculator, Australia’s premier resource investment advisory. If you’d like to know more about Jason’s financial world view and investing philosophy then we recommend you join him on Google+. It's where he shares investment insight, commentary and ideas that he can't always fit into his regular Money Morning essays.
Jason Stevenson is Money Morning’s resource analyst. He believes that the best way to make money is, and always has been, to back Australia’s best explorers, miners and refiners.
Before joining the team at Money Morning, Jason worked at boutique firms which advised fund managers and high net wealth clients where to invest. Now he brings that expertise to Money Morning, where he provides readers with his take on the Aussie resource sector. Whether it’s iron ore, oil and gas, gold or lithium, you’re guaranteed in-depth analysis of Australia’s biggest and most important sector. Jason is also the analyst for the leading resource investment advisory Resource Speculator. This is where he shares the best mining prospects and natural resource plays he finds on the ASX. Official websites and financial e-letters Jason writes for:

Leave a Reply

Be the First to Comment!

Notify of