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Gold Continues The Pattern



  • Gold, like all markets, displays repetitive patterns in its price history.
  • We present two patterns, one from 2000 and another from 2013.
  • If these patterns continue to replicate, then gold should drop into the $1,225-$1,250 area before bouncing.
  • This idea was discussed in more depth with members of my private investing community, Away From The Herd. Start your free trial today »

We present patterns in the price history of the gold market that seem to be replicating in real time. If these similar patterns continue to replicate, then gold will continue to fall, but is unlikely to fall below $1,225 before bouncing higher.

Gold has a strong inverse-correlation with the dollar. There's a pattern forming that's similar to the trading in 2000 - both then and now, the dollar was in a trading range and gold was trading within a pennant formation (chart below).

Source: ANG Traders, StockCharts

In 1999, as the dollar broke out of its trading range, gold dropped out of its pennant formation. If the IMF had not restricted its gold sales, gold would have likely fallen to much lower prices (chart below).

Source: ANG Traders, StockCharts

This time around, the IMF is unlikely to interfere in the market like it did in 1999, which means that when gold drops out of the pennant formation, it could be a seriously deep dive. However, the pattern similarity implies that gold is likely to "ping pong" inside the pennant formation before falling out of it (chart below).

Source: ANG Traders, StockCharts

Gold also is replicating a pattern from 2013 that started with breach of the short-term trendline and the 20-week MA crossing over the 200-week MA. The purple highlighted areas on the chart below show the similar patterns of the RSI, MACD, Stochastic, and ADX. If the pattern continues to replicate, then we expect gold to drop to the $1,225-$1,250 zone before bouncing higher (chart below).

Source: ANG Traders, StockCharts

Gold's technical situation has deteriorated at this point:

  • The RSI has accelerated its fall from overbought levels
  • The MACD has made a bear cross-over and followed through
  • The stochastic has dropped away from over-bought
  • The -DI has crossed

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This article was written by

ANG Traders profile picture
An MMT-based analysis of the equity markets
I have a degree in Math and Science from the University of Toronto, as well as a degree in education, also from U of T.

During my 44-years of investing, I have come to understand that the only constants in the stock market are fear and funds (money), and that Modern Monetary Theory (MMT) provides the best description of how money moves through the economy.

In partnership with David Huston, and in association with Alan Longbon we search for and analyze repetitive sentiment and fund-flow-based patterns in the stock market's price history, and offer a Marketplace service, Away From the Herd (https://seekingalpha.com/account/research/custom_subscribe?slug=ang-traders), that reports our findings and allows subscribers to replicate the trades we are involved in for our own accounts. My four decades of experience in the market have taught me to not trade "for the sake of trading". Identifying, and staying with the primary trend is key to wealth accumulation. We use a variety of investment instruments such as stocks, ETFs, and options to take advantage of opportunities as they arise.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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