Gold 1300 - Stuck Anew? Or Set To Brew?
Mark Mead Baillie | Aug 21, 2017 01:01AM ET
Anyone who has been judiciously following the price of gold over the past seven years knows that the 1300 level is where price essentially gets stuck. This shows stark both above in our year-to-date panel as well as below in this simple line graph of monthly closing prices for the past seven years. The red line is 1300, and gold's settling the week yesterday (Friday) at 1290 is as noted:
To be sure, gold keeps getting re-buoyed of late by short-lived geo-political concerns running from Russian collusion, quickly forgotten for North Korean nukes, further forgotten for Spanish terror. Quite a world of worry out there when what appears vitally threatening one week is replaced by something else the next. Speaking of which, what is "next"?
Certainly not a stock market crash, albeit an analyst interviewed on Bloomy Radio this past week cautioned as follows those who believe that stocks only go up (paraphrased) "...over its long history, the S&P is prone to corrections of five percent." No kiddin'. This dude obviously hasn't been around very long. (Oh, and from our "Say It Ain't So Dept.", with Q2 Earnings Season officially finished and 446 of the S&P 500 components therein reporting, only 216 [48%] of them bettered their Q2 of a year ago ... not very buoyed there).
'Course, gold was even further buoyed this past Wednesday from the Federal Open Market Committee's 25-26 July minutes, which if you read them you likely found the members to be rather mixed up. (As one FinRadio commentator queried, how can the brightest economic minds in the land not figure out what's going on?) Perhaps they ought simply record and track the incoming data. We do:
Get The News You Want
The cockeyed FOMC aside, let's drill down into this gold 1300 level. Here's what we've come to understand time and again about this area, indeed why 'tis no wonder that we find 1300 to be very technically significant, and not just because 'tis a "big round number":
■ 'Tis above the "inescapable" 1240-1280 box
■ 'Tis above the "The Whiny 1290s", (wherein at 1290 price presently sits at this writing)
■ 'Tis below structural resistance created in falling from last year's high at Base Camp 1377
■ 'Tis below the then unfettered run to the 1600s
"Did you say to the 1600s mmb?"
Oh this is where it starts to get fun, Squire. As penned a couple of missives back with respect to price moving higher from 1300: "...get gold above ... Base Camp 1377, and ... there's really not that much technical resistance 'til the 1500s(!)..." And as we next put that into graphical context, 'tis fair to actually say the 1600s. Check this out:
Beginning with gold's All-Time Closing High of 1900 back on 22 August 2011, to date there have been 1,509 trading days. The following chart depicts the number of days price has settled within each of the "100-Handle" categories. For example, price closed only that one day in the 1900s, but has closed 540 days in the 1200s, including yesterday. Still, having spent most of yesterday just above 1300, let's say that's where we now sit, i.e. the "You Are Here" label. Now look up from level: so swiftly did the price of gold fall through the 1500s and 1400s that there are comparatively few days in that zone. Indeed, the technician may define that as a "gap". And as one of our most favourite seasoned traders says: "All gaps get filled", leading us to note that from 1300-to-1600 there's "nothing but air", especially so above Base Camp 1377. But because that's such a stretch to the 1600s, it appears completely out-of-range to many a player and thus 1300 to them is "The Top". 'Course, we know 'tis not:
Next we go to the precious metals' "Baby Blues", those dots of 21-day linear regression trend consistency. And true to form, they do us warn: for gold on the left, 'tis rare to see them hanging in the air for as long as they have, the rightmost bar (Friday) appearing as what technicians call a "hammer", price having gone way up, only to then settle most, if not all, of the way back down. As for silver on the right, her Baby Blues are less firm, she herself on Friday also getting "hammered". So should a down week next ensure, we've marked each panel with a red line of structural support: 1280 for gold and 16.95 for silver, (below which she's actually slipped a pip per this writing):
In sum, gold has returned to where it regularly gets stuck: 1300. Should price now slip, but then readily get grip, the next battle zone would be to regain Base Camp 1377. Again, a world further unfurled could get us up there in a hurry. Otherwise, even with price trending up, we'd expect an ornery fight for gold in having to slog through all the resistance created during last year's July-September down run.
Either way, given potential near-term pullback some due, 'tis not something over which one ought stew -- unless gold goes rip-roarin' back down through that agonizing 1280-1240 box. gold's overall tide being more in flow mode, (rather than in that of ebb), breeds opportunity from setbacks. For as a savvy miners trader and charter reader of The gold Update oft reminds us: "Ya can't sell 'em on the way up if ya haven't first bought 'em on the way down." Now that's worth toasting with a golden summer brew!
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