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I’ve been predicting the latest breakout in gold for nearly a month. Those of you who subscribe to one or both of my investment services, the All-Weather Investor and Inflation Survival Strategy, have been reading about that.
The precious metal had been pushing against the top of its trading range for a while. But despite the bullish sentiment, gold was unable to break through.
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| From late August into October, gold tends to perform well, as the festival-buying season in South Asia commences. |
That all changed late last week, when gold surged past $1,370 an ounce. The rally was mainly due to strong demand from Asia, which has helped put a solid floor of support under the precious metal. However, we’ve yet to see the same type of enthusiastic interest from Western investors. Furthermore, gold’s recent move, while impressive, has not yet breached the 15 percent mark. So we can’t say gold has entered a new bull market, as silver has done.
Now, the question becomes: “Will gold take that next step into bull-market territory?”
There are many arguments for and against that, but today I’d like to focus on one key gauge. Based on the strong technical indicators evident in the above chart, my answer to the question above is an emphatic “yes.”
I want you to pay particular attention to the red and black lines at the bottom of the chart. Collectively, these are the moving average convergence/divergence indicator (MACD), which displays momentum. As you can see, the black line has crossed above the red line for the first time since November of last year, a reliable signal that gold will head even higher from here.
I’m also encouraged by the strong seasonal tendency that gold exhibits. From late August into October, the precious metal tends to perform well, as the festival-buying season in South Asia commences.
I saw those two trend shifts coming some time ago, and moved my subscribers into a long position on gold. But after the latest move up, even the staunchest of gold bears are finding it hard to ignore the momentum. We’re now even starting to see some movement in the true test of gold’s support that I mentioned earlier — interest among Western investors.
I believe the next phase in this rally will be for those investors to jump on the bandwagon. When they do, gold will finally break back through the $1,400 mark, and the bull market will be in full swing.
To find out how that rally may play out, go to the Money and Markets’ Facebook page by clicking this link, where I will unveil a scenario.
Best wishes,
Douglas
