Gold Prices This Week And Next Week’s Outlook

In an NFTRH subscriber update last week we noted that the precious metals rally has just about reached anticipated ‘bounce’ levels (using the HUI Gold Bugs index as one example, the 195 area has a confluence of resistance) and that some volatility can now be expected.

There are still inputs to the bullish case, however. Those are the seasonal that on average sees gold and silver strong through January, CoT, which still has room on its trend, a post-tax loss (where applicable) ‘January Effect’ and most importantly, some fundamental aspects that have improved (noted in this week’s premium report). So while a pullback would be normal, it would probably not end the rally.

On the monthly chart gold stopped at the resistance that should have stopped it because entering a new bull market was not going to be easy. It then closed 2017 with a December test of the wedge and Hammer candle. ADX and +/- DI show the downtrend exhausted and a fledgling big picture uptrend potentially in play.

The noted resistance zone above is still likely to be a battle zone, but if USD eventually follows through on its breakdown (it dropped from a bearish pattern on Friday) and makes a lower low to September, don’t be surprised to see gold break through resistance. This would benefit the precious metals sector as part of an ‘inflation trade’ in which many boats are lifted. But the bigger significance of that resistance zone is its status as a would-be transition point from bear to bull market.

One day, perhaps many months out, the gold sector could distinguish itself as unique amid economic contraction and a stock bear market. Contrary to the popular gold bug view, that could come with a USD that is firming with the risk ‘off’ bid (ref. Q4 2008). But for now, USD has gone bearish and any bounces notwithstanding, is on an intermediate-term downtrend.

So gold and silver are currently part of an ‘inflation trade’ and have damaged the bear case, with gold breaking the wedge to a higher high (to November) and silver breaking through resistance per the daily charts.

There is much more to the picture than these daily views per the work we did this weekend in NFTRH 480. Weekly charts along with sector and macro fundamental considerations tell their stories and add much color to the analysis.

But for the scope of this article, gold and silver did as we expected and whipsawed chart jockeys who thought the early December breakdowns were real. As we noted at the time in this space, the rally view was supported by CoT data, seasonal averages and sentiment that quickly became over bearish. Now the snap back rally is on…and I think it will continue in January, probably after some shaking of the tree.

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