Last Time ‘This’ Happened, Gold Popped 80%
Patient gold traders are about to be rewarded.
In May, I told you gold was going higher.
Since my essay, the price of gold hasn’t done anything. Gold is only up around 2% over the past three months. That’s not exactly the big return most gold bulls are looking for.
But last week, I showed you how the “topping” action in the U.S. dollar could soon send the price of gold soaring in the short term.
And we’re likely about to get a “buy” signal from one long-term gold-buying indicator. The last time this indicator flashed “buy,” gold soared 80% in a little more than two years…
Take a look at this long-term monthly chart of gold…
The bottom of the chart shows the Moving Average Convergence Divergence (MACD) momentum indicator. On a short-term basis, the MACD shows overbought and oversold conditions. On a long-term basis, the MACD can be used as a timing indicator.
Without getting too complicated, when the shorter-term black trend line crosses above the longer-term red trend line, we have a “buy” signal. When the black line crosses below the red line, we have a “sell” signal.
The arrows on the chart show you how previous buy and sell signals have worked out in the past.
Keep in mind, this is a MONTHLY chart. So these are long-term buy and sell signals. They point out trends that are likely to last a year or more.
For example, the last buy signal for gold was back in October 2009. The signal lasted for more than two years, and gold rallied from about $ 1,000 per ounce to more than $ 1,800 – around an 80% gain – just before the MACD indicator generated a sell signal.
That sell signal has now been in place for 2.5 years. Gold has fallen from $ 1,800 per ounce to its current price of around $ 1,300.
But look at the setup on the MACD indicator. The black line is curling up and is on the verge of crossing over the red line. If this happens, it will generate a long-term buy signal for gold – the first long-term buy signal since 2009.
Since this is a monthly chart, all that matters is how the indicator looks at the end of the month. But based on how it looks right now, gold is about to soar.
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