A Look at Gold Prices

Feb 11, 2008: 10:17 AM CST

With the US Dollar Index having made new lows, the price of gold has been making new highs. This makes sense from an intermarket relationship, but let’s take a recent look at the chart for more insights.

First, gold’s weekly chart:

Notice the triangle (not drawn) throughout 2006 which broke strongly to the upside in mid-2007 (corresponding with the Federal Reserve’s decision to begin lowering US interest rates).

From an intermarket analysis perspective, commodities and the US Dollar often experience an inverse relationship, which we have seen recently. As the US Dollar Index has trended lower, gold (and many other commodities) have trended higher.

The daily chart of gold is even more impressive:

There are a few key lessons to learn from this chart.

First, if you look very closely at the triangle consolidation pattern, notice that the momentum oscillator broke out of the triangle two days before the actual price break. I rely on the market principle “Momentum Precedes Price” and this is another example of this phenomena assisting us in viewing price behavior.

Second, look at the major support the 20 period moving average has provided the price. Only during the triangle consolidation pattern do we see the price close beneath the average, but the rising 50 period moving average provided key support in those occasions.

Third, a slight momentum divergence has formed recently, but it’s nothing to concern us majorly.

I mentioned that the US Dollar is trending inverse gold prices. Let’s look briefly at a weekly chart:

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One Response to “A Look at Gold Prices”

  1. Stock Market » A Look at Gold Prices Says:

    […] Corey Rosenbloom wrote an interesting post today on A Look at Gold PricesHere’s a quick excerptI rely on the market principle “Momentum Precedes Price” and this is another example of this phenomena assisting us in viewing price behavior. Second, look at the major support the 20 period moving average has provided the price. … […]