Gold Price In 2014 Consolidating Above Major Support Area [SPDR Gold Trust (ETF), iShares Gold Trust(ETF)]

record gold holdingsGold Silver Worlds: So far, the gold price in 2014 in the first six months has been trading in a tight range between $1190 and $1390. The yellow metal had one significant rally in February / March and one moderate rally starting in June.

The spikes in the gold price in 2014 have been driven partly by fear and partly by inflation expectations. The first rally coincided with the outbreak of tensions in Ukraine. The second (modest) rally was driven by the US Fed statement mid June that inflation expectations are soaring.

Basic chart analysis shows that the gold price chart in 2014 has a clear “line separator” which has served as major support throughout the first half of the year. As evidenced by the first chart below, the $1270 – $1280 area has been resistance in the first weeks of the year and subsequently turned into support after the February / March rally.

gold price daily 25 July 2014 price

 

From a technical point of view, the gold price is developing a major trading range. After the crash of 2013, both gold and silver established a bottom in the summer. That bottom was tested on the last day of 2013. Since then, the newly developed trading range has held up quite well. The general rule of thumb is that the strength of a trading range (“consolidation”) is a function of the time spent to establish that range. The fact that gold, silver and miners are trading in a range for a year now should result in a solid base before a new trend starts.

The above chart also shows that the very short term trend has been down, as evidenced by the blue line connecting the highs in July. The price has touched the trend line three times, a sign that the price is ripe to start trending.

In which direction will the gold price be trending in the second half of 2014? That is impossible to say. For the time being, there are two conflicting forces at play.

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