Charting Asia

Gold price to rise further, charts show, with a $1,340 upside target

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There are three key features to look out for in this breakout in the gold price, which also happens to confirm our analysis back in February.

The first and most important feature on this chart is the breakout from the fan trend line pattern.

The second feature is the breakout confirmation from the Guppy Multiple Moving Average (GMMA) relationships; the long-term group has compressed and turned decisively upwards.

The third feature is the way price has remained above the critical resistance level near $1,200, using it instead as support point.

Gold is a proxy for the entire commodity complex and we see this behavior reflected in oil and silver charts.

The upside target for gold is now the historical resistance level near $1,340. This is the short-term target and the fan trend line breakout behavior suggests it could be hit quickly.

Gold has a very strong resistance band between $1,150 and $1,180 but this level was decisively broken with a rally to $1,240. Any new trend breakout requires a sustained move above $1,180 and a compression in the long-term GMMA averages to show that investors have become buyers. These conditions have been met, confirming the breakout

The weekly gold chart shows a series of fan downtrend lines, which is a very long-term trend reversal pattern. The four downtrend lines have a common starting point from the high of October 2012. Note, these are not Fibonacci fan lines, they're a series of downtrend lines with a common starting point.

This pattern usually contains between four and five downtrend lines, and has been a dominant feature on the gold chart since 2013 so cannot be ignored. It's a long-term trend reversal pattern that was seen on the dollar-yen chart prior to the very powerful breakout in November 2012. This pattern often ends with a very fast, strong breakout as has been also shown on the gold chart.

We'll use the ANTSSYS method to trade this breakout continuation. Investors now have proof that the gold price can stay above $1,200, which signals a new, sustainable uptrend that will be confirmed by increased separation in the long term GMMA as investors become more determined buyers.