Gold May Be Breaking Out
Thursday, February 12, 2009 17:02Gold’s recent price action suggests a breakout may be near.
After consolidating for almost a year, it appears that gold may be in the early stages of another advancement. The chart below illustrates the breach of the 1 year downtrend (Red line). The RSI (bottom section) suggests that the move may have more to go as indicated by a reading below 70. RSI can be a good indicator for judging if a security is either over bought (above 70) or over sold (below 30). The current reading of 64 implies further room for upside.
The following chart is a weekly chart of gold over the last 3 years. We can see that the primary uptrend (blue line) has not been breached (even throughout the liquidation cycle of late last year).
Investors should understand that asset classes experience very long 20+ year cycles.
The last 100 years of stocks, bonds, and commodities, such as gold, illustrates these macro trends. Stocks, for example, experienced a 25 year bull market from 1904-1929, a 20 year bull market from 1946-1966 and a 24 year bull market from 1983-2007. The 20 year (or so) periods in between were times of sideways or declining prices.
Gold also moves in very long term macro cycles. We are in the 7th year of what usually is a 15-20 year cycle.
The bigger picture can be observed by the 30 year gold chart below. Notice that the previous bear market in Gold lasted 23 years.
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David Wilson says:
March 4th, 2009 at 10:03 pm
The administration could make ownership of gold (and other precious metals) unlawful.