Gold Looks Ready for Renewed Price Strength as the Buck Turns Lower
If gold was the name of a horse you would have a hard time finding it lately in the Daily Racing Form. Large-cap tech names have been getting the best jockeys.
Let's check out the charts of the SPDR Gold Shares ETF (GLD) to see if the commodity that John Maynard Keynes once called the "barbarous relic" is poised for an upside move.
In the daily bar chart of GLD, below, I can see that prices have tested the rising 50-day moving average line and stand above the bullish 200-day line.
The daily trading volume has slowed since early December but the daily On-Balance-Volume (OBV) line has remained steady to rising the past three months. The Moving Average Convergence Divergence (MACD) oscillator has corrected lower the past three months but it has stayed above the zero line. Interesting.
In the weekly Japanese candlestick chart of GLD, below, I can see a rally in place from late 2022. The rally in 2023 was more impressive than the rally in recent months. A setback in September/October broke the rising 40-week moving average line but prices are back above it now.
The weekly OBV line has gained strength the past four months and suggests we are seeing a shift towards aggressive buying. The MACD oscillator has narrowed but it has not crossed to the downside and remains above the zero line. A recent lower shadow near $185 tells us that traders have rejected the lows.
In this daily Point and Figure chart of GLD, below, I can see an upside price target in the $222 area. A trade at $193.55 is a clear upside breakout on this chart.
In this second Point and Figure chart of GLD, below, I used weekly price data with a five-box reversal filter. Here the chart shows us the long-term trend and a price target in the $299 area. Let's call it $300.
What Is Going to Get the Gold Price Going?
Will it be a second wave up in inflation? Eventually, but probably later in 2024. The dominant narrative in the investment community is that inflation is slowing. Is it going to be geopolitical tensions? I am sure some people (read bad actors) are probably betting on that.
What about the direction of the U.S. dollar? Let's check.
In this daily bar chart of the dollar index (DXY), below, I can see that prices have been failing at the underside of the 200-day moving average line. Prices made a new high for the recent move up Tuesday and are close to breaking below Tuesday's low this Wednesday.
If the DXY closes below Tuesday's low it will be a short-term sell signal (a close below the low of the high day).
In this weekly Japanese candlestick chart of the DXY, below, I added indicators from two longtime friends in the business -- John Bollinger and Larry Williams -- from California to St. Croix. Let's see if these relationships will pay off.
Bottom-line strategy: I have recommended a number of precious metals names in the past year. Continue to hold those longs and consider adding to positions unless you have fallen for the "siren sounds" of mega-cap tech.
(GLD is a holding in TheStreet's Action Alerts PLUS portfolio. Want to be alerted before the portfolio buys or sells stocks? Learn more now.)
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