Technical Analysis: Gold May Have Just Bottomed

2016 began well for gold prices.

Between January and June, gold bugs were quite pleased, as the metal soared from $1,070 to $1,364.  Then came the second half of the year, and it all went south.

In fact, since June, gold hasn’t been the greatest trade to hold at all.

It’s been a terrible trade, falling from a July 2016 high of $1,375 to $1,125, managing to hit every ugly branch on the way down.

However, after finding support at $1,125, it’s beginning to show signs of life. 

And typically, when relative strength (RSI), moving average convergence divergence (MACD) and Money Flow (MFI) become this oversold we begin to see signs of incredible near-term rallies, as well.

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Much of the downside came courtesy of a strong U.S. dollar, the election results and the Federal Reserve’s poor decision to hike rates another quarter point. 

In fact, the dollar is up about 6% since the elections, and another 2% in December.

The other headwind has been India, which could limit gold imports, which could reduce overall global demand. 

Again, though, gold has become technically oversold and ready to move higher.

If support holds, we need to push through $1,168 and then break $1,180.

Should that happen, we could eventually see $1,400 this year on the heels of Donald Trump’s economic plan, which could stoke interest in gold investments. 

In fact, with Trump’s desire to stimulate with tax cuts and incredible spending, 2017 could turn out to be a great year for gold trading.  Gold could also rise on increasing inflation, too.

At oversold levels, we’re bullish on gold with a hopeful retest of $1,225 near-term.

Some of the best ways to trade potential upside in gold, include:

  • Harmony Gold (HMY)
  • Barrick Gold (ABX)
  • Goldcorp (GG)
  • SPDR Gold Shares (GLD)

Gold will need patience.  But with global uncertainties and a new Administration, patience could pay off well. 

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