The price of gold has started to firm up in the past few days and sets to rally up to at least its $1850 short-term resistance level. More meaningful resistance is at its October high and upper 200-day Bollinger Band, which is currently trading at $1855. The big thing about gold, though, is that it has been in a long drawn out consolidation phase that has been going on for over a year and a half. Take a look at the chart and the 200-day Bollinger Bands around the price, which come together during times of consolidation on long-term charts.
You can see how the 200-day Bollinger Band width indicator on the chart has now simply flat lined.
This is a sign of how long the consolidation has been going on, which is visualized in the triangle pattern.
A breakout to the upside will lead to a big bull run, and should happen next year.
A trading range pattern has been the story of this year.
Next year it will be a big move outside of this range.
I still have about 1/7th of my main account and IRA devoted to gold and silver ETF’s and a similar portion in big cap mining stocks. I also own commodity ETF DBA and various energy stocks, with a roughly 50% cash position. I came into this year about 70% invested, but went down to 50% as the broad market internals peaked this summer.
Many big cap mining stocks are now firming up and seasonally tend to have strong moves from January into the Spring.
Check out NEM, for example.
NEM came back down to retest support in December and has rallied through its October high. I own NEM.
AU, which I also own, is in a better buying position on its chart at the moment.
One could buy AU for a trade and put a stop below $19 and aim for a rally into the $23-24 area, although I’m holding it as more of a long-term investment.
This has been an interesting year for many markets, but gold has been something that people have lost interest in due to its long-drawn out sideways phase, which has seemed to go on forever. Look for that to end next year to bring more interest into the metals and mining stocks.
Have a good New Years tonight.
The market will be closed on Monday, so maybe this is time for a nice long-weekend vacation?
-Mike
