Gold posted a solid August despite a two-day sell off to end the month, the metal gained 5.4% after a 7.4% rise in July. Still, gold is down 22% since last October and is one of the worst-performing assets this year. I warned about declines on Wednesday and on Thursday.
Technically, it’s now abundantly clear gold is rebounding. It hit the 38.2% retracement at $1415 this week and it has climbed above the 55-day and 100-day moving averages.
The near-term problem is that it’s slightly overbought. Gold gained for 5 straight days before the recent sag. A fall below $1390 would totally relieve those conditions and put gold into the buy zone. A deeper sell off could bring the area of support down to $1350 into play but I believe that line will hold.
Gold technical analysis with 55dma
Historically, September has been the best month of the year for gold with an average 2.35% gain over the past 30 years. In addition, gold has gained in August in 10 times since the bull market began in 2001. Every year except one (9 out of 10) it followed with gains in September.
In the bigger picture, I believe gold will head to $1080 but for the moment, any dips in gold should be bought.
