Below you’ll find two charts: (1) gold priced in US Dollars and (2) gold priced in Japanese Yen. In both, it appears that gold is at important levels.
First up, dollars. At a bit over $1,300 per ounce, the bulls would like to see it hold, otherwise we’re probably headed back to the late-June lows. On the other hand, if it does hold, you might notice the downward sloping line that I drew in that traces back to the dump in April. Again, if the price holds, you see what could arguably be described as an inverse head-and-shoulders, which is suggestive of higher prices.
Now for the Yen. It is a bit more constructive, and I have drawn three lines that are relevant. The first captures a recent peak in early September and then heads sideways to late May. If price were to hold, you have a cup-and-handle set-up in the making. Which leads to my other doodles. The price of gold is currently hitting the intersection of two supportive trend lines. One that is moving northeast from late-June and the other which runs sideways from early-April. Since gold is not operating below these support lines (as is the case with the USD chart), it makes a stronger case for bullish price action from here.
Which leads to my pairs trade idea. Buy gold, short Yen using GLD calls and FXY puts. A thought, not a suggestion or advice.
