On gold’s 10-year chart we can see its fine giant 4-year long Head-and-Shoulders bottom approaching completion, with the price rising up in recent weeks to the broad band of quite strong resistance at the top of the pattern, partly due to tensions over N Korea. These are expected to ease, which will make a short-term correction back more likely. Before leaving this chart note the volume build on the rally out of the Right Shoulder low of the pattern, and the strength of the volume indicators shown, especially the Accum-Distrib line, which rather amazingly is already at new highs. This certainly bodes well for the longer-term outlook.
Like gold itself, gold stocks are preparing to break out of a giant 4-year long Head-and-Shoulders bottom. They are still quite a way from having broken out, as we can see on the 10-year chart for GDX shown below, and vulnerable to a near-term reaction on a dollar rebound, that should not see them lose much ground. The big volume on the rally during the 1st half of last year showed that the bottom was in and that a major new bullmarket is in prospect. The formation of the Right Shoulder of this H&S bottom served to correct this strong advance.
We will now look at some of the big reasons that the dollar could rally soon. On the 8-year chart for the dollar index we can immediately see one of them – the dollar has now arrived at the lower boundary of a large Broadening Top pattern in an oversold state, and while it is believed to be destined to break down from this pattern in due course, it looks likely that it will bounce of its lower boundary over the short to medium-term to correct the oversold condition before going on to break down later.
Conclusion: the long-term outlook for gold couldn’t be better with it looking destined to break out from a giant 4-year long base pattern to enter a bullmarket that promises to dwarf the last one, as the dollar collapses and China (and possibly Russia and other countries) backs its currency with gold, and the cryptocurrency Ponzi scheme implodes, with the liberated funds (or what’s left of them) flowing into gold and silver. Cryptos got a shock late last week when China reportedly revealed that it was set to close local exchanges. From China’s standpoint cryptos are a needless risk to their citizen’s capital, and represent potential competition for their future gold-backed Yuan, albeit not for any intelligent person, and are a nuisance that they can deal with simply by banning them, which as a Command Economy that can ignore criticism, they have the power to do. Near-term gold is looking set to react back as the dollar bounces off support with tensions over N Korea easing as the US has no choice but to accept that N Korea has graduated to the nuclear club, even if it cannot be described as one of its august members.