Gold Opens Above 50-day Moving Average for First Time Since October 16

Gold prices opened above its 50-day moving average for the first time in more than a month. The primary distinction between then and now is the fact that on October 16 gold prices opened above its 50-day moving average and closed lower on the day, but still above that critical technical average. That created a long candle that can be identified is a hangman.

The hangman is one of the umbrella groups of candles which include the hammer, the inverted hammer, the shooting star, along with the hangman. All four candlestick types are comprised of very small bodied candles (the rectangle drawn between the open and close of the market session) with wicks (the single-line that goes above or below the real body indicating the markets high or low for the session) at least three times the length of the real body.

In the case of October 16 as well as last week’s attempt to trade and close above this average were unsuccessful. Wednesday of last week gold prices did reach the average and closed above it. This was followed by Friday’s half-day session in which he gave up a little ground and closed right at 50-day moving average.

Today’s market move was considerably different from all the other examples in that not only did gold pricing open above the 50-day moving average but close substantially higher. This is genuinely the first occurrence of this type price action since the market broke below the 50-day moving average back during the last week of September.

Technical indicators do not move the market, but instead are a mathematical expression of fundamental data and events that are being factored into market pricing. As such, I believe today’s occurrence is significant.

Most importantly it signals the real potential that the double bottom achieved in October of last year will, in fact, prove to be the lows achieved during this recent decline as gold traded to $1264 per ounce on two occasions. On both occasions, after achieving those lows, moderate rallies followed.

This certainly increases the probability that we will see a continuation of the current rally as traders and market participants continue to watch the first Senate vote on US tax reform closely during this week. Our next Federal Reserve Chairman- designate, Jerome Powell will speak before a Senate panel sitter is confirmation tomorrow.

This could prove to be a most interesting week for gold investors and traders as they witness a return of bullish sentiment.

Wishing you as always, good trading,