A golden crossroads

Market analyst Regina Meani provides an update on gold.

Through the course of 2021 we have looked at the gold price twice, in April and again in September. The recent gold price action suggests that it is timely to update its position as it approaches a significant crossroad which will determine the next direction for the price. In both our previous reports we highlighted the barriers between $1800 and $1900 that the price needed to overcome to establish another leg higher.

The current price for gold at US$ 1867.90 is within the resistance zone but more importantly is approaching a downward trendline within the barrier zone. When the price moved above $1800 on 22 October it triggered a “tandem trading method ” short-term buy signal. This has not been reversed but the old barrier at $1900 needs to be cleared to register a longer-term signal. Near-term support for the gold price lies around $1830.

Looking at two gold ETFs in the Australian market we can be encouraged by their positive positions which suggest that they are preempting a break up in the gold price. Gold Bullions Securities (ASX: GOLD $237.73) offers investors a simple, cost-efficient and secure way to access the movements of physical gold without actually taking delivery of the metal. It provides a return equivalent to the movements in the Australian dollar price of gold, less a daily management fee. On 5 November the price for Gold Bullion Securities broke away from its short-term downtrend and forged higher through resistance around $232 signalling the potential to test higher barriers around $240 and between $255 and $260. Near-term support lies around $230.

Beta Shares Gold Bullion ETF (ASX: QUA $16.54) gave a similar short-term buy signal on 8 November when the price broke away to $16.15. The price is now approaching a similar crossroads, to that being experienced by the US$ gold price, at a resistance juncture between $16.80 and $17.40. Near-term support lies around $16.00.

If the near-term support levels noted above are breached, it would suggest at the least that an upward breakaway was being delayed for the gold price.