Weekly Chart: Gold weeky chart has shown negative divergence the last couple weeks but this parabolic move has moved the RSI and MACD to levels matching and perhaps sneaking above the prior highs (teal lines). The stochastics and money flow, however, remain firmly negatively diverged. The price now is at the top rail of the channel and a look back at 2009 provides a fractal comparison. The negative divergence set ups shown in blue and purple created spank downs. Note the bull flag pattern in red during the first half of 2011. Since the RSI and MACD levels are up to the prior highs, this hints that after a pull back occurs price will want to come back up to match or even exceed these current levels.
The wild card is if margin requirements are raised for gold since the affects will be drastic, just like the silver margin changes in late April. The chart is consistent with placing a major top currently although the continued strength in RSI and MACD hint that an M Top may be the final pattern to top things and this will take a month or two to play out. The other projected outcome is this level is the top now and gold will pull back for a multi month breather before making the next secular move up. The gold:silver ratio is moving up so gold is actually favored over silver currently.
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Gold eventually makes its way back to the 65 week MA line. Note that the highs now are at maximum levels above this 65 MA magnet line, just like the two previous red ovals. Current action seems to rhyme with late 2009.
Gold touched 1781 after the Fed announcement yesterday. Note the channels showing the move up in three stages; gradual up, accelerated up, and now parabolic. The RSI sneaks ever so slightly above the prior high four months ago indicating that price will want to come back up again to these current levels or higher, after a pull back occurs. Ditto the MACD. The red lines for stochastics and money flow show negative divergence and should create a pull back now.
Of interest is that looking back to study the three year gold rally, the daily chart is negatively diverged across all indicators favoring a pull back in price. By considering the topping action on the weekly chart, the projection is a major top for gold over the next month or two. The move down may be initiated by an increase in margin requirements.
Conversely, the recent strength has to be respected. Many traders now talking of the inflation-adjusted targets of 2200 or 2400. Backing off of that using Keystone's 80-20 rule says that if 1800 is achieved, the trip to 2200 would be likely. Further, a close above 1780 would lead to 1820, thus, the 1780+ level is a gateway to the higher prices. A potential close above 1780 requires close watching over the next few days.