Both $GOLD (spot gold prices) and GLD (gold ETF) remain slightly above their respective key support levels which were defined by the 2013-2014 triple-bottom lows. The fact that gold has been able to rally back above that level after briefly breaking down and trading below for about two weeks has so far set the potential for a bear-trap/short-covering rally although I am somewhat concerned about the relatively muted price action since that major support/resistance level was regained early last week. Typically, the price action immediately following a bull trap or bear trap is impulsive as those traders who positioned on the breakout/breakdown scramble to exit their positions and new traders pile in once it is clear that the breakout failed and so far, that has not been the case.

Irrespective, price action comes first with volume and all other supporting evidence a distant second so as long as $GOLD remains above the 1180ish level and GLD above the 114.50ish level, I will remain “cautiously bullish” on gold, becoming increasing bullish should gold prices start to climb comfortably above that key technical level. I have updated the daily $GOLD chart, which is accessible on both the Live Charts page as well as the Live Chart Links sidebar on the homepage of RSOTC. The previous downtrend line has been adjusted to account for the price action over the last several months. That downtrend line, which current comes in around the 1250 ($GOLD) and 120 (GLD) level, which also aligns with minor horizontal resistance as defined by the Oct 21st reaction highs. The next major direction in gold prices is likely to be determined by a solid break above or below these support (1180/114.50) and resistance (1250/120) levels.

Until then, I’d expect the price action in gold & the miners to continue to be choppy and relatively difficult with large day-to-day and even intraday swings, which makes for tough swing trading as all but the widest of stops are likely to be run. Longer-term traders bullish on gold, silver & the mining stocks might opt to take advantage of this volatility using a scale-in strategy (accumulating fractional positions over the next several weeks/months) as long as gold remains above support, with a scale-out exit strategy or hard stops set on a solid move and/or weekly close back below support.