We hear endlessly from articles on goldbug websites and message boards about China and the ascendant East gathering up all the gold that they can find from the declining West. Has anyone actually stopped to see what gold looks like in terms of the Chinese Yuan?
Everyone has seen how dollar denominated gold has again encountered resistance at the Trendline from the 2011 high, but did you know that gold in Yuan has spent this year consolidating above the equivalent Trendline? We feel that it pays to take a somewhat broader view of the worldwide gold market instead of myopically concentrating on and dissecting every small move of the paper COMEX market. We follow Gold and Silver in Dollars, Yen, Euro, Sterling, Aussie and CAD as well as in Yuan and this helps to give perspective to these global markets.
Chart 1 shows the downtrend that Gold in Dollar terms has been bumping up against since the middle of 2016. Even though it now looks to have mustered enough energy to push through this level, it is far behind Gold in Yuan in terms of a positive chart.
Take a look at Chart 2 which shows a similar downtrend from those heady 2011 highs. Gold in Yuan moved through this line a full year ago in the middle of 2016 and has also been able to backtest this breakout - resistance turning to support is undoubtedly a bullish sign....
So let’s look at the action in a bit more detail. At Forex Analytics we use Median Lines or Pitchforks to put the moves into a framework or pattern that is easily understood. All of a sudden, simply by overlaying the pitchfork, as in Chart 3, we give the fluctuations in price a context and can look with confidence for Supports and Resistances.
The lower green Sliding Parallel gave Support to price and from there it moved strongly through the puce downtrend and reached all the way to the Upper Parallel of the fork. Note that the backtest was also where the green Sliding Parallel could give Support. From there price has pushed to the upside again and is now establishing a line of Support higher in the fork than the previous one. Again this is marked in green and arrowed. As anyone who follows charts knows, higher Support is a bullish sign, and so long as the price of Gold in Yuan stays above this green Sliding Parallel we will remain bullish....
Please check out more of our work at www.forex-analytics.com where we have two services. One concentrates on Precious Metals and Miners, the other takes a broader view and also includes Foreign Exchange, Indices and Commodities.
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