The Charts Say “Buy Gold!”
Why the Technical Picture for Gold Just Turned Bullish Again
Big news for all technical traders! Gold just broke its downward correction. This means gold is about to take a U-Turn and head higher based on a few technical indicators.
Specifically, gold broke above its downward correction line (red line) and climbed back up above its blue 50 day Simple Moving Average (SMA).
Next, the RSI and MACD are on the move higher. Also, the yellow metal never made it below its upward sloping 200 day SMA. These are all bullish signs for gold!
You can see more specifics on the chart below…
So why is this technical picture turning around for gold?
It’s because fears are rising in the market. Traders are getting anxious. Every day you turn on the TV, all they talk about are growing debts/deficits and the possibility of a country defaulting (read: Greece).
In case you don’t think this could be a big deal, let me remind you about Argentina and its default. When Argentina couldn’t pay back their bondholders, this one event rattled markets around the world. That was just Argentina – not some major economic powerhouse in the world like the EU.
On top of this, Germany, France and the U.K. all hold large sums of Greek debt. They also hold debt in the rest of the PIIGS (Portugal, Ireland, Italy, Greece and Spain). So if any of these countries default, they will definitely get burned too!
Another huge dynamic is the quick rise of inflation from around the world! Part of gold’s appeal is that it’s a hedge against inflation (in addition to being a cure for the “fear factor”).
Just months ago, only two of the eight major economies had ANY inflation. The rest were still in a deflationary mode. Roll the hands of time forward a few months and now seven of the eight major economies have inflation. Some of them have a LOT of it! Check it out below.
Growing Global Inflation = Growing Gold Prices!
So while many people bash gold and say that this rally is over…I say we just corrected and consolidated a large move higher AND that we’re getting ready for the next major “leg upward” in this gold rally. Make sure you’re ready too!
Happy Trading!
Sean Hyman, Professor FX
P.S. This is the exactly the kind of moves that I reveal twice a week in my Chart of the Day videos. If you have been missing this FREE educational tool, you can catch the latest video in the sidebar of FX University Daily each day.
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