Gold Rally: Get Ready For Fireworks?

| October 15, 2015 | 0 Comments

goldGold Rally To $1,200… Then What?

Gold bulls are getting it on…

The yellow metal successfully broke through an important resistance level at $1,150 an ounce a few days ago.  As loyal readers are fully aware, I pointed out this promising technical setup in early October.

Here’s an updated look at the gold chart I provided a few weeks ago…

Gold Rally through resistance, a chart of gold

As you can see, gold recently broke through (green circle) important resistance (red line) at the $1,150 an ounce area.  The rally has the yellow metal up 7.1% over the past month.

Where does this market go from here?

Given the recent bullish technical development, a test of $1,200 is highly likely in coming days.

While it’s nice to know gold likely has additional upside ahead, don’t get too excited just yet.

You must fully comprehend what the $1,200 level means from a technical perspective… 

Gold Rally, a long-term chart of gold

Believe it or not, $1,200 is the last major technical barrier holding gold in a multi-year downtrend.  That price level corresponds with the red line in the chart above.

If the yellow metal can punch through that ominous line, there’s a chance we see a spectacular gold market blowup to the $1,450 area.

Clearly, there’s a lot at stake at $1,200 an ounce.

What’s the most likely outcome?

In my opinion, the gold market will have so much bearish pressure at $1,200 that bulls will have no choice but to throw in the towel.  In such a scenario, a return to the mid-$1,100 area seems appropriate.

But here’s the deal…

A number of fundamental factors have some thinking the long-term bottom is already in for gold.  In fact, some big name investors are going all in on the metal. 

What fundamental factors are backing newly minted gold bulls?

First of all, global economic worries are mounting as China and other emerging markets turn in one decidedly poor economic reading after another.  These global weaknesses recently forced the US Federal Reserve to delay raising interest rates.

But that’s just the start of it…

US economic readings are getting worrisome as well.  Case in point, yesterday’s US producer price index (PPI) showed stunning weakness, which points to building deflationary pressures.

Finally, the world’s largest retailer, Walmart $WMT revealed yesterday it’s full year sales will be flat.  That’s not a good sign for anyone bullish on US and global economic growth.

All these signs point to the idea that the Fed will have to keep a zero interest rate policy for longer than expected.

While I have yet to go overtly bullish on gold, I have to admit the positive bullet points are building for the metal.

Remember, gold ETFs provide some of the best ways to profit from market swings.

Until Next Time,

Justin Bennett

BIO:  Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com.  With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them.  Sign up for our free reports and commodity newsletter at https://commoditytradingresearch.com/free-sign-up.

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Category: Gold, Precious Metals

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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