The gold market has experienced a significant rally since late 2023, a movement that long-term gold enthusiasts have eagerly anticipated. This recent surge echoes the hopes of “gold bugs” from the early 1980s, a period when substantial portions of investment portfolios were dedicated to gold, despite advice on diversification. Even then, rallies, such as the nearly 50% gain in late 1987, fuelled optimism, though hope alone does not constitute an investment strategy.
Investors have shown renewed interest in gold over the past two years, especially after the 2020 high of $1920 per ounce was surpassed. Looking back, in August and September 2011, Comex gold futures traded consistently above their monthly STARc+ bands for two consecutive months. This served as a cautionary signal, ultimately leading to a significant market peak as gold prices fell from $1920 to $1045. A recurring pattern observed in the gold market since the 1980s is the formation of trading ranges, which can persist for months or even years. These ranges are often attributed to extreme shifts in market sentiment that require considerable time to resolve.
One such range developed between July 2016 and June 2019, concluding with a closing price of $1413 in June. This marked the beginning of the current rally, which saw an April high of $3509. Currently, gold has been trading above its monthly STARc+ band for five consecutive months. While this does not preclude further price increases, it suggests that the market is becoming significantly “stretched”. A potential target for the next rally is the yearly pivot resistance at $3687.
Beneath the price charts, the On-Balance-Volume (OBV) provides further insights. The OBV moved above its downtrend line in March 2024 and remains in a strong uptrend, holding above its rising Weighted Moving Average (WMA) in April. Another valuable tool for commodities like gold and crude oil is the Herrick Payoff Index (HPI), which assesses money flow by incorporating price action, volume, and open interest. The HPI turned positive in November 2022, indicating positive money flow, and recently reached a new high alongside prices, showing no divergences.
The positive slope observed in the WMA of both the OBV and HPI currently offers no warning signs of an imminent market top. Gold futures reached their peak in late April, trading significantly above the weekly starc+ band before pulling back to test the 20-week EMA, now at $3259. The monthly R1 for July is at $3558, with the weekly starc+ band positioned at $3655. Historical data shows that these starc+ or starc- bands effectively identify price extremes on the weekly chart.
Based on closing prices, the OBV has exhibited lower highs since April, forming a negative or bearish divergence. While declining, the OBV remains above its WMA. On a longer-term basis, the HPI has also formed lower highs but has consistently remained positive and above the zero line since October 27, 2023. If the current movement is merely a pullback within an ongoing uptrend, the rising WMA could be tested before gold resumes its upward trajectory.
Recently, gold experienced a significant decline, closing down 1.4% (over $46) as the stock market rallied sharply. The closing price was below the 20-day EMA at $3348, with the monthly pivot at $3282, just above the daily starc-band at $3274. The recent trading range also shows support at $3270, with key resistance at $3472. A tentative monthly pivot for July is set at $3373, and a close above this level would signal a positive shift.
The daily OBV has formed lower highs and closed below its flat WMA, indicating a negative short-term outlook. Similarly, the HPI closed at -169, suggesting negative daily money flow. The last positive signal for the HPI was on May 21, 2025. For a new rally to begin, the HPI would need to move back above the zero line and clear the resistance at lined.
While monthly analysis demands patience, it offers the most reliable insight into the major trend. Despite gold being considerably overbought according to the monthly STARC+ band analysis, this does not yet confirm a major top. Conversely, both weekly and daily analyses are currently negative, and a test of the 20-week EMA at $3259 is possible. The SPDR Gold Trust (GLD) has retreated to its monthly pivot at $303.67, which could trigger stop-loss orders. Longer-term traders might consider a stop below $296, and investors are advised to await new weekly buy signals before making further purchases.
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