Golden bulls: Chart breakout is hugely significant

by Alistair Strang from Trends and Targets |

Breaking out of a long-term downtrend is a big deal for gold, argues our charts expert, but where next?
 

Mixed bags of gold nuggets

We tried something new at the weekend, giving a talk to the local (in Argyll) business community on thoughts for the future, Post-Brexit, using varied instruments as the basis of discussion. Obviously, sterling, gold, Brent crude, the FTSE 100 index, and even Lloyds Banking Group featured in our presentation, each item provoking useful Q&A sessions.

The big discovery; apparently, it's possible to talk about the stock market, making it interesting, useful, and entertaining! Perhaps foolishly, I found myself agreeing to do it again after Brexit, next time in a venue which can handle 300 people!

One of the subject areas, gold, is perhaps of special interest. As the chart below illustrates, the metal has broken a downtrend that dates back to 2011. As a result, there's a pretty fair chance it's about to start showing some proper recovery.

In keeping with our law demanding "Higher Highs", the shiny stuff requires better than $1,328 presently, and we'll view it as on a cycle to $1,373 next. Secondary, if bettered, is a longer term $1,443. 

A word of warning, one which should be visually obvious. The prior highs of the gold market in 2018 will be almost certain to provoke some hesitation in price growth, doubtless around the $1,350 mark. As a result, we'd tend to anticipate some stutters at such a level.

For it all to go wrong, the price requires a melt back below 'blue' on the chart, $1,290 at present. 

Therefore, if taking a Big Picture long position and hoping for the best, it affords a relatively tight stop against such a large potential reward. 

We rather suspect this flamboyance in gold prices should be reflected among the miners who specialise in the area.

ii view: You can also gain exposure to gold via collective investments like funds, trusts and ETFs. interactive investor's new Super 60 list of high-conviction investments picks the iShares Physical Gold ETC in the 'specialist' category. We like the fact that this option buys gold directly, rather than gaining exposure by buying derivatives, like many commodity funds do.

Source: Trends and Targets      Past performance is not a guide to future performance

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation, and is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

get more news and expert articles direct to your inbox
Sign up for a free research account and get the latest news and discussion, and create your own Virtual Portfolio