Bearish Formation Threatens Gold’s Advance

After the November pullback, GLD began to rally again. This week, on Wednesday, price exceeded the nearest November top, which made official the new rising trend from the November low. Brief celebration ends the following day as GLD tops, setting the top boundary for a bearish rising wedge formation. Rising wedges are bearish because they normally resolve downward.

GLD has rallied +40% since the February low, so it is entitled to take a break.

The weekly chart shows the root of the problem, which is the parabolic advance (+71%) from the 2022 low. Parabolic advances beg for correction, which can sometimes be severe. In the case of GLD, we do not expect more than a sideways digestion process to dampen the angle of ascent.

The monthly chart emphasizes the steepness of the advance to all-time highs, and the need for some digestion or correction. Should gold pull back, two support levels are apparent: 2450 and 2085. We think the second level is unlikely because sentiment is still too bearish.

Conclusion: Gold has had a very profitable rally since the 2022 low, and it would be beneficial for it to take a break with either a pullback or consolidation. It appears that that process has begun.

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