Gold’s young upleg just enjoyed a major upside breakout, bolstering strong technicals and heralding a coming Golden Cross buy signal. Investors have started aggressively buying gold again after record-high stock markets distracted them. This gold upleg’s upside momentum is really building, portending accelerating gains in coming months. Yet sentiment remains poor, with traders still quite bearish on gold.
Virtually no one is excited about gold these days. Mainstream investors continue to ignore it like usual, while contrarians largely expect a lackluster sideways grind at best. This apathy is the natural result of gold’s recent consolidation between late February and mid-April. With 6+ weeks seeing no net progress, there was little to spark any enthusiasm. Thus gold gradually faded from speculators’ and investors’ radars.
That’s exactly why consolidations and corrections exist, to rebalance sentiment. At preceding interim highs, greed grows too intense to be sustainable. So subsequent drifts or selloffs bleed off this greed, replacing it with apathy or fear. That forces out most marginal traders, paving the way for the next major rally higher. That looks to have started just over a week ago in gold, as evidenced by multiple indicators.
Gold just surged to a major technical breakout above its key 200-day moving average, which greatly strengthens its latest uptrend. Technically-oriented traders carefully watch price action relative to this most important of moving averages. 200dma breakouts following correction-magnitude selloffs are powerful buy signals. So funds have already started moving serious capital back into gold since that breakout.
Gold’s technicals and fundamentals are both very bullish, contrary to the lingering bearish sentiment still dogging this metal. Let’s start on the price-action side, since that is kindling investment demand. This first chart simply looks at gold along with its key moving averages during its young bull market birthed near the end of 2015. Gold is now in this bull’s second major upleg, and momentum is really building.