After tackling the currencies earlier, we now look at my favorite metal from the table of elements. I have never been a guy who focused on Fibonacci retracements, but, holy moly, does the gold chart confirm that analysis lately. First, here’s the chart (using GLD as a proxy):
Let me explain what’s going on. I have connected the trough of $114.46 on 12/31/13 with the peak of $133.69 on 3/14/14 – represented by the white, hashed line. Off of that, I have added Fibonacci fan lines (the dark blue lines), which measure the important Fibonacci retracement levels of 38.2%, 50.0%, 61.8% and 100.0%. What you’ll observe is that the correction from March 14th until April 1st matches perfectly with the 38.2% level. More specifically, the green arrow highlights where the 38.2% level lies – and in drawing a horizontal line from that point, you’ll see that the correction ended exactly at that price.
Pretty remarkable. And probably a decent sign that the near-term correction in gold was over.
As an afterthought, the light blue lines show the Fibonacci retracement levels for the move up off the April 1st low, and they suggest that we could be getting close to the next short-term pause in the price action.
