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Why the Next Move in Gold May Be to the Upside

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A look at gold over the next few months from various perspectives.

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Let us have a look at two charts featuring gold from the non-USD perspective.

We'll start with gold priced in euros.



In this chart, we saw a breakdown below the rising resistance line and the next support line is at the 2012 low. Since this level has not been reached yet, it seems we could see some weakness on a short-term basis.

Does gold have to decline based on that – from the USD perspective? Not necessarily. Quite simply, gold could not rally immediately if the dollar declined. Gold priced in euros could move slightly lower; if gold then catches up or rallies more significantly than the dollar declines, the price of gold in euros would rally. This chart does have some clearly bearish implications, however.

Let us proceed to the second chart that shows a completely different picture: gold from the perspective of the Japanese yen.



Here, the outlook is bullish as a breakout above the 2011 high has been seen. More importantly, the breakout was verified as prices stayed there for more than three consecutive trading days.

Summing up, quite a few strong signals are seen in the gold charts this week. Gold price in euros is a bit bearish, and price volatility can be expected in the coming weeks. With so much going on, and so many factors in place, we feel we must emphasize keeping what's most important right in front of you. This is crucial and is why we keep featuring gold from the very long-term perspective, even though quite often, there are little changes from week to week.

The main point is that gold moved below the 300-day moving average (after already a lengthy consolidation) and then back above it. This accompanied major bottoms in the past, and we think that another is once again behind us. The ongoing debate now is whether consolidation will end immediately or if we will witness more sideways trading before the rally proceeds. The fundamentals are in place and gold will seemingly have to eventually rally. Taking all volatility signals along with the long-term gold picture into account, it seems that the next move will be to the upside, not down, as the gold in euros picture might suggest. As far as long-term investments are concerned, we believe that staying in the market with your gold and silver holdings continues to be a good idea.

Thank you for reading. Have a great and profitable week!

For the full version of this essay and more, visit Sunshine Profits' website.

Twitter: @SunshineProfits
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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