On April 27 I wrote an article titled, Gold At A Decision Point, wherein I observed conditionally that things looked favorable for the start of another leg up. Since then, the technical picture has improved slightly, but it still feels like a struggle.
Currently, I can see three positive elements in the picture — prices have held above the horizontal support drawn across the December low, a declining tops line drawn frm the February top has been penetrated to the upside, and the PMO is rising. Otherwise, a long-term sell signal was generated when the 50-EMA crossed down through the 200-EMA.
More serious problems are visible on longer-term charts. On the weekly chart below we can see that a long-term rising trend line has been decisively violated, the weekly PMO is falling, and the 17-EMA has crossed down through the 43-EMA. While the EMA crossover confirms the long-term sell signal on the daily chart, but we must also note that the crossover in 2009 quickly reversed.
On the monthly chart the PMO is falling from very overbought levels. Again, we can see the rising trend line violation, but now we can also see that this trend break has happened at the top of a parabolic rise from the 2001 low. This break may be similar to the correction in 2008 (violent, but ultimately setting up another major up leg), but it is also possible that the break in the parabolic could accelerate into a collapse to much lower levels.
Conclusion: Since the top of last summer’s rally, gold’s performance has been disappointing. Promising rallies stall prematurely, and significant damage can be seen on the longer-term charts. Our market posture on gold has been neutral (fully hedged or in cash) since March 15, and nothing is happening at this point to make us change that stance.