Against a backdrop of unprecedented stimulus support from central bankers – from New York to Frankfurt to Tokyo – gold bugs have had plenty of ammunition for their fiat-trouncing, metal-buying thesis.
But it hasn’t worked out well for them.
Gold is down nearly 12% in just the last six months. It’s off a full 17% from its 2011 highs.
That said, we’ve witnessed yet another bounce off the all-important $1,550 support level. This price has consistently held gold higher for the past two years. And today’s chart shows that it appears to be holding again… for now.
Here’s the chart of daily gold futures:
I see a bullish candlestick pattern that indicates gold will once again reject the $1,550 level. It’s called the Morning Star pattern, circled in the chart above.
This pattern is similar to the Evening Star pattern I wrote about a week or so ago. As an update on that bearish pattern I identified in home builder NVR: prices are down a little more than 4% in the last week.
But back to gold… The 3-day Morning Star pattern is a very bullish signal, especially when it occurs at an important level, like $1,550. Plus, we’re also seeing bullish divergence with the RSI moving higher as gold drifted down to fully test $1,550.
I expect gold to bounce higher from here. Just how high it goes… that depends on the central bankers’ fortitude. Their next show of stimulus-readying should boost the gold bugs’ cause.