It’s been a rough two months for the precious metals space, with the price of gold sliding nearly 9% from its May highs before finding a bottom in late June. While this turbulent price action has eroded the bullish posture of the Gold vs. S&P-500 ratio and contributed to a sharp decrease in sentiment, the good news is that the big picture still remains bullish as we head into the last two weeks of July.
This is because gold continues to hover above its long-term moving average and seems to be building a handle to a massive 10-year base. Having said that, the bulls will need to start playing offense soon, or this setup will begin to look abnormal. Let’s take a closer look below:
Many investors have understandably thrown in the towel on miners and gold over the past month, given that gold has been one of the most challenging trades this year, unable to hold onto its upside momentum. However, if we examine the long-term chart, we can see that gold remains in an uptrend with higher highs and higher lows over the past five years and is back-testing its yearly breakout level near $1,765/oz.
Notably, the majority of its 1-year correction since Q3 2020 has occurred above this yearly pivot, suggesting that the pullback is normal for the time being. However, to maintain this bullish posture, the bulls are going to need to hold $1,670/oz at all costs. When it comes to reclaiming exiting this short-term correction and regaining momentum, we will need a monthly close above $1,925/oz. So, while the bulls are doing their job playing defense, it’s unlikely this will be an easy trade like it was last year until the bulls begin playing better offense.
If we move over to the daily chart, we can see that we continue to remain in a choppy range, but this has allowed gold’s long-term moving average (green line) to play catch-up to price. This green line is typically a floor for the metal in bull markets, suggesting that this moving average should act as strong support for price, if we do see further weakness.