After pulling back over the last couple of months, gold looks like it's ready for a move higher into year end.

On a fundamental basis, the commodity is a tricky investment, as it relies heavily on central bank policy and macroeconomic data. One bullish piece of news is that President Trump appointed Jerome Powell as the new Chairman of the Federal Reserve. Powell is perceived by many as dovish on monetary policy, which could be positive for gold. Lower interest rates mean a greater tendency toward inflation, and that leads to higher gold prices.

Looking more closely at the technicals, represented by the SPDR Gold Shares ETF (GLD​), you can see an uptrend line from the beginning of the year when GLD was rallying. This line was only broken once in July, but was quickly reclaimed. Furthermore, on the recent pullback, this line held up in the beginning of October as well as just last week.


This uptrend support level is also the level of another bullish technical indicator, which is a double bottom currently on the GLD chart. A double bottom is when a stock or ETF makes a low at a price two times (separated by a period of time) and finds support at this level. When this occurs, it is thought that buyers have come in to support shares at this price level and there is strong demand. Should a trader go long on GLD here, a stop would be on a close below $120, as this would represent a failed double bottom, as well as a breakdown below the uptrend line from the beginning of the year.

One way to know when GLD is ready to break out would be to watch the downtrend resistance line from September, which currently sits at $122. A move above that would open the door to future gains.

The Bottom Line

Gold, represented by the SPDR Gold Shares ETF, looks to be putting in a bottom and in turn is setting up for a move higher. It must hold the $120 level for the bullish development to stay intact. A breakdown would represent a failed double bottom bullish pattern and a failure through a longer-term uptrend line from the beginning of 2017.

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