The gold price has been strong recently, having risen over $180 from the August 2018 low of $1,167 to the peak above $1,347 as of last week.
There have been solid fundamental reasons for gold’s run: primarily, the Federal Reserve last month hinted that it may not continue raising interest rates, as it had been assuring it would over the past three years. Such in turn has been considered a sign that the Fed may in fact reverse course and begin cutting rates later this year, which is generally considered negative for the value of the dollar and positive for precious metals.
However, are these fundamentals enough to keep bullion’s run alive? Will this market narrative continue going forward?
A Rare Warning Signal
Despite the recent performance, one of our proprietary technical indicators is flashing a major warning signal for those who follow the language of the charts. Specifically, gold is showing a sell signal witnessed only four times over the past eight years. This warning signal coincided exactly with the absolute peak in gold at $1,923 in September, 2011. This same signal appeared again in January 2013, immediately before gold fell $500 from $1,680 down to $1,180 over just six months.
So reliable has this signal been, that it has never occurred without gold falling at least $130 over the subsequent six months.
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