A few weeks ago I wrote that the XAU was in the "sweet spot" of its momentum uptrend and was still comfortably above its dominant short-term moving averages, all of which were rising at a good rate of change at that time. But in recent days the XAU has backed to test the uptrend a bit. With all the worry out there about the gold price peaking, is this is the end of the XAU's upside run? For that answer let's turn to the market itself.
As you can see in the above chart, this is a picture of strength and continued upside momentum. The XAU uptrend is still intact and I have confidence that the uptrend line from the August lows will remain unbroken. In my opinion, XAU still has a better-than-average chance of overcoming its previous high of 106 by early next month and re-testing the 110 level.
What is really striking about this chart is how the XAU hasn't even once closed below the 30-day moving average. This is the dominant short-term trend and momentum identifier and although it has been tested a few times in the past three months, the XAU has barely even penetrated beneath it on an intraday basis. This is a testimony to the continued internal strength of the overall gold stock sector.
Historically, whenever the 30/60/90-day moving averages fan out the way they have with the XAU and harmonize on the upside (with the 30-day on top, the 60-day in the middle, and the 90-day on the bottom) it signifies that the cycle behind the rise hasn't peaked yet. Typically, a market can get at least close to three months of a rising trend before the first major correction once the 30/60/90s get into this position.
On an immediate-term basis, the XAU is about to go into an oversold position. You can see this in the stochastics indicator in the above daily chart. This is another sign of technical strength, namely, when pullbacks are brief and relatively shallow and the internal indicators quickly go into an oversold position. Such has been the case for the XAU in recent weeks.
The XAU also c short-term trading standpoint it usually pays to stick with such winners. ontinues to exhibit relative strength compared to the broad market. From aA market that continues to outperform other major sectors is likely to continue to do so in the foreseeable future.