Even though gold has been replaced, at least temporarily, by Bitcoin as an inflation hedge, it finally seems to be bottoming out. But according to the charts, it is not yet time to buy the precious metal.
The weekly chart shows that gold broke out of a three-year base in June 2019. From its breakout, it rose 50% to its $2,075-per-ounce peak in August 2020. From then on, the precious metal dropped to $1,680 in March.
But that low $1,680 was significant for a few reasons. First of all, the decline was held precisely at a significant level of support. Second, gold bounced three times from support forming “positive volume swings” (higher lows than last week and a close above last week’s close). Third, downward price momentum waned even as gold hit lower lows.
What should investors pay attention to? Spot gold would confirm that a significant bottom was in place once it could close above USD 1,840. But a weekly close above $1,860 would mark a big break above a 15-month downtrend – serving as a signal to buy gold again.
Gold has been ignored by investors for the past year. Now is the time to keep a close eye on the gold price. It may surprise in the coming months and become a timely purchase.
Andrew Addison is the author of The institutional view, a research service that focuses on technical analysis.
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