Current Gold Action is Doing Some Good

Gold has made it back to and thru, an old multiple point low around $1850 (the pink line) that was considered support as we broke down from the top.  It is constructive to make it through old lines of support, or resistance.

Gold defended successfully its 200-day moving average and is now just below the 50 day. (blue)

As a measure of short-term price action, daily action is now above both the 10- and 20-day exponential moving average.  If you look carefully in the blow up, it appears both have turned up and are about to cross.  Note how they acted on the way down.  They provided a good signal of weakness but now are flashing the opposite message.

Drawing the linear trend line is difficult in such choppy markets.  The general rule is to connect as many points as possible.  If I throw out the top of what was the “false breakout”, the line looks like it is breaking as we write.

Thus, we are breaking linear and moving average trend.  This is quite positive for gold.

Almost all momentum indicators are swinging positive.  This too, is good development.

We have now come up about $90 in price and we are not overbought either in momentum or in sentiment.  This suggests the gold recovery will continue.

Gold is not attracting much attention right now.  Bitcoin is in the limelight.

Silver is doing many of the same things, only has been stronger than gold.  We never touched the 200 day, and we are above the cluster of the 10 day and 20-day exponential and the 50 day as well.

It looks like we are just breaking the bear linear trend.  We need to see that breakout hold and expand over the next few days.

This is a time of seasonal strength for both metals, with December and January usually the strongest months of the year.

It is good to see joint strength between both gold and silver.

Thus, many positive things are happening in the metals space as it relates to pure price action.

In terms of fundamentals, the House and Senate just passed another lockdown related relief bill worth almost a Trillion dollars.  It seems today, no project is worthwhile unless it costs a Trillion.

The dollar is weakening, money supply is growing, commodity prices are firming, and the inevitability of a Left of center government in the US is sinking into the markets.  It would appear that loose monetary and fiscal policy will prevail for the next several years.  All of these factors mentioned are positive for the precious metals.