Gold is doing great! | decision point

I don’t usually start with monthly charts, but that seems like a good place to start because most of the good news is there. Starting from the left side of the chart, we can see how gold achieved a parabolic rise to an all-time high in 2011. The parabolic rise called for a correction, and boy did gold correct it. It hit a new all-time high in 2020, more than three years after falling almost -50% to its lowest point in 2015. It formed a bullish cup formation during that period.

Next, it was consolidated (handled) for over three years, ultimately coming out of a 12-year consolidation. I think the important point is that it took gold over 12 years to digest its massive rise to the top in 2011. I think this provides a solid foundation for the most recent developments.

Currently we see gold going parabolic again and it is difficult to know when it will peak. The preferred solution to this vertical movement would be lateral integration, but we will have to wait and see. In my opinion there shouldn’t be any kind of parabolic collision.

Another optimistic sign is that sentiment remains bearish. Assess sentiment by checking whether closed-end Sprott Physical Gold Fund (PHYS) is selling at a discount or premium. As you can see, it has been selling at a discount for most of its 11 years, clearly showing that the public is not yet excited about owning gold. We believe this is because cryptocurrencies are attracting a lot of money that could be transferred to gold. In any case, bearish sentiment is bullish on gold.

If you look at the daily candlestick chart below, you can see that the gold ETF (GLD) closed at an all-time high today, just above a solid support level. To be clear, GLD is a vehicle that can be used to trade/invest in gold, while the $GOLD symbol is a dataset of continuous contracts used to track the price of gold, but cannot be owned.

conclusion: Gold made huge gains in the early part of this century over a long period of time, over 12 years. There has recently been a clear break from that trading range and it appears that another strong long-term rally is underway.

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