By Christopher Aaron
For seven weeks now, gold has been bumping against its long-term down trend that has kept prices in check since 2011. Below we show the 8-year perspective for gold, noting the down trend in question (shown in magenta) that has been acting as resistance each time the precious metal attempts to stage a move higher.
Gold finds itself directly in the crosshairs of a battle between precious metals bulls and bears. The bears are attempting to hold the metal down at this level, because a breach of a long-term trend line would be a major technical event in the eyes of many investors. It would be a signal to the mutual funds and institutions waiting on the sidelines that the 2011-2015 bear market is decisively over.
Having been mostly on the sidelines from 2011-2015, we are in the bullish camp at this juncture. Consequently, have a reasonable expectation that this long-term down trend will be broken in the near future, possibly as early as September.
Why September For A Gold Breakout?
Gold has been consolidating for most of the summer with resistance sloping downward at the aforementioned trend line…and support coming in near $1,310. Gold spiked as high as $1,318 on June 16. As of today August 24, the price is only $20 higher at $1,338.
Seasonally speaking, this consolidation has taken place during the weakest time of year for gold – i.e. the summer. A consolidation during the weakest season of the year actually shows a cyclical relative outperformance. New buyers are stepping in and metal is being transferred from weak to strong hands throughout this consolidative process.