Gold at Head and Shoulders? Or More?
Analysis of gold prices lately points to a head and shoulders top in the pricing chart, with our having passed the peak and headed back down the second shoulder. As you can see in the chart below from Daily FX, the peak, at $1346.75 per ounce, is well above the current price of roughly $1300.
If the head and shoulders effect does materialize, though granted, it would be a little lopsided, the expectation would be that we enter a significant period of decline for the price of gold now that we’ve cleared the final peak.
But that isn’t the only way to read the trends. In fact, Dave Kranzler at Seeking Alpha believes that gold is on the up long term, after the price has stayed within a roughly $200 range (from $1200-$1400) since 2013.
He believes that the price of gold has been going through a consolidation process, and that it is now finished. With that in mind, he suggests that the risk/reward quotient for investing in gold is as reward focused as it has been since 2001, a time that preceded another sharp rise in the price.
Even if Kranzler is correct, it doesn’t necessarily negate a dip in the short term, as the head and shoulders pattern would suggest. In fact, Kranzler recognizes this possibility, and suggests that people dip their toes in slowly, rather than diving in at one time.
As we know, gold is always a fairly safe long-term investment, as its rarity guarantees its floor. But if Kranzler is to be believed, now is the time to get in for the relatively short-term as well. Investing in gold now could reap significant rewards over the next few years.