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Looking for Higher Lows and Higher Highs

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Today I am looking back at previous major lows where sentiment was in the toilet, technical indicators were extremely oversold, and positioning was bullish for signals that the bottom was in and the next rally has begun.

GOLD 2020

GLD 2020

I’m using the 4-Hour chart to better illustrate what to look for when Gold has bottomed and is heading higher and to be able to identify the change in trend sooner than on a daily chart.

As you can see from the circles on the RSI and MACD Histogram, Gold was extremely oversold when it bottomed on March 16. #1 shows the peak of the first bounce. #2 shows that this was followed by a higher low. Then that was followed by a higher high at #3. In fact, it gapped higher on two occasions, signaling that Gold was breaking out to the upside. A series of higher lows and higher highs ensued thereafter, clearly showing the trend had definitively turned to the upside. The break of the prior high at 159 was just the icing on the cake. Then it took off to a new record high at 2089 or 194.50 in GLD terms.

In summary, we are looking for a series of higher lows and higher highs and a surge upwards to the second peak. A break of resistance is the icing on the cake.

GLD 2018

GLD 2018

Just as in 2020, you can see from the circles on the RSI and MACD Histogram (and this time the MACD Line also) Gold was extremely oversold when it bottomed on August 15, 2018. #1 shows the peak of the first bounce. #2 shows that this was followed by a higher low. Then that was followed by a higher high at #3. It gapped higher on five occasions, signaling that Gold was breaking out to the upside. A series of higher lows and higher highs ensued thereafter, clearly showing the trend had definitively turned to the upside. GLD proceeded to rise to a peak of 159 in March 2020. Gold rose from a low of 1167 to 1700.

GLD 2016

GLD 2016

By now, you should be seeing the pattern associated with major lows and what signals the trend has changed to the upside. Gold bottomed at 1124 in December 2016 and then rose to 1369 in April 2018.

GLD 2015

GLD 2015

Suffice to say that Gold rose from 1045 in December 2015 to 1377 in July 2016, one of the biggest and fastest rallies in Gold’s history.

GLD 2022

GLD 2022

We are clearly coming off an extreme oversold condition, also seen on the daily and weekly charts. If we get a higher high above 162.13 (currently 162.04) and gap up in the process, the short-term trend has turned up and the odds that the bottom is in place increase significantly.

On the contrary, if we fail to get that surge higher and fall to a lower low, we have to start all over again.

Switching to the daily chart for Gold:

GOLD SPDR

We’re clearly coming off extreme oversold levels and a positively divergent lower low. The first level to take out is the recent peak at 1738, then 1752, to increase the likelihood that the bottom is in. But getting back above the 200-day moving average would be a huge sign that new record highs are on the way, and a break above the prior high of 1883 would be confirmation, imho.

In summary, we need to see a change in trend to the upside, a series of higher highs and higher lows, just as we did at 1450 in March 2020, 1167 in August 2018, 1124 in December 2016, and 1045 in December 2015.

Don’t miss a golden opportunity.

Now that you’ve gained a deeper understanding about gold, it’s time to browse our selection of gold bars, coins, or exclusive Sprott Gold wafers.

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About the Author

David Brady has worked for major banks and corporate multinationals in Europe and the U.S. He has close to thirty years of experience managing multi-billion dollar portfolios including foreign currency, cash, bonds, equities, and commodities. David is also a CFA charter holder since 2004.

Using his extensive experience, he developed his own process utilizing multiple tools such as fundamental analysis, inter-market analysis, positioning, Elliott Wave Theory, sentiment, classical technical analysis, and trends. This approach has improved his forecasting capability, especially when they all point in the same direction.

His track record in forecasting Gold and Silver prices since has made him one of the top analysts in the precious metals sector, widely followed on Twitter and a regular contributor to the Sprott Money Blog.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

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