Has Gold Topped Out?
With last week’s action, the Comex gold futures were up 3.8%, finishing the week above the highs of the prior five weeks. For the past few months, Gold prices had been correcting from the early August high at 2089. The volume last week was higher than it had been over the prior four weeks, which was also an encouraging sign.
That changed with the positive news from Pfizer early Monday, as the gold futures collapsed, closing down 5% on Monday. Volume was the highest since late August. As of the close at 1861.6 yesterday, gold is down 4.3% for the month—but of course, the month is not over yet.
The November close will be important for the monthly technical studies, as the low for the month so far of 1848 is just slightly below the September low of 1851. The long term monthly chart shows that the 38.2% retracement support from the September 2018 doji low of 1259.80 is at 1738.80, with the 50% support at 1629.90. The still-rising 20-month exponential moving average (EMA) is at 1746.2. These are all support levels to bear in mind.
The monthly on-balance volume (OBV) moved above multi-year resistance (line a) at the end of 2019. It has now dropped slightly below its weighted moving average (WMA) and will look negative if gold closes November below the September close at 1880.
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The Herrick Payoff Index (HPI) uses volume, open interest, and prices to determine whether money is flowing in or out of a commodity. The HPI is currently above its WMA, and more importantly, is above converging support (lines b and c) as well as the zero line. When the HPI is above zero, it is a sign of positive money flow; a negative reading would be an indication that money is flowing out of gold.
The daily chart of December Comex gold shows the sharp drop Monday, testing the support going back to early July (line b). The Monday low of 1848 was just above the monthly pivot support at 1846.3. A move above the resistance at 1969.9 (line a), is needed for an upside completion of the trading range. There is additional resistance on the daily chart at 2025.
Even though the volume during Monday’s selling was higher than the 30-day average, the daily OBV has held above its WMA, and turned up on Tuesday. There is stronger OBV support going back to early September (line c). The daily HPI dropped from 988 to -1374 on Monday. The HPI is above the support from August and September (line e).
The SPDR Gold Trust (GLD) has had a low so far this week of $173.64, which is just above the monthly pivot support at $173.58. GLD is trading below its 20-week EMA at $176.36 with the weekly downtrend (line a) at $182.83. The OBV is holding above its WMA with more important support going back to August (line b). The price’s declining 20-day EMA at $178.13 (not shown) is also meaningful resistance.
The VanEck Vectors Gold Miners (GDX) has been weaker than GLD over the past three months, down 11.4% compared to a 7.6% decline in the GLD. GDX is down 10.4% so far this week, but is, as of Wednesday’s close at $37.15, is still above the October low at $36.01. The monthly pivot support is at $35.22. If that support level is broken, the next support is at $34.49, which is 38.2% Fibonacci retracement support from the March low.
The 20-week EMA is at $38.61 with the weekly downtrend (line a) at $41.58. The OBV is slightly below its WMA, and if it breaks below the prior low it could decline to the stronger support at the May high (line b). The daily OBV (not shown) is well above the late October lows, which could set up a potential bottom formation.
Combining the monthly and weekly technical analysis on the gold futures, as well as GLD and GDX, indicates the close in November may be significant for the intermediate-term trend. A close at current levels will cause some continued deterioration, while a strong close is needed to indicate that decline from the August lows is over. For updates on my gold analysis, follow me on Twitter.
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