The long term chart of gold shows that we are very close to secular support, which goes back several decades. Old resistance becomes support, so the 1980 and 2008 peaks will be acting a strong support. Moreover, support coincides with the psychological level of 1,000 USD. In sum, we believe the downside is limited!
It is not only gold, but other leading commodities that are nearing huge support.
Crude oil, acting as a key energy asset, is testing its 1990 peak of 39.5 USD/barrel. The chart below is a monthly chart, so we could see an intra-month blip below 39.50 USD, similar to last August, but chances are very small that crude oil will be trading structurally below its 1990 peak.
Another leading commodity is copper. It has a different chart structure, but its chart shows (in its own way) that critical support is near, as the green trendline is just 10% below today’s spot price. Note that copper has corrected -50% from its all-time high, which is another way to say that the downside is limited.
Our conclusion is that we have reached huge support areas in 3 leading assets.
Do not forget this rule of thumb: Investors make their biggest gains when buying at secular support levels.
Given the stiff correction in gold and commodities, we do not anticipate a raging bull market as of the moment support is reached. Our view? As precious metals were the first asset to correct, we anticipate they will be the first to recover.
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