Last Updated on Dec 13, 2021 by Aradhana Gotur
Kunal Rambhia is a Fund Manager at The Streets (a private fund). He has been in the equity market since 2010, in various roles ranging from Associate Research Analyst, to Research Analyst and Associate Portfolio Manager. Kunal has media appearances on CNBC and ET NOW, and is a visiting faculty in multiple colleges.
Friends, herein I share my positional view on Gold with various higher timeframe charts. Longer historical data is available in dollar terms. So, I prefer to study gold in dollar terms.
Table of Contents
Monthly Chart: Time Cycle
This is the monthly line chart of Gold since 1970 in dollar terms. By studying the data, it seems that the wave changes the direction approximately after every 127 bars (periods). The longer cycle in between was also approx. double the regular cycle. The most recent cycle was the time correction cycle, ranging from August 2011 till now. Seems that this cycle may end anytime soon near January – February 2022. Alternate phase is seen so far, highlighted in the following table.
|Phase of Cycle||Price Behavior|
|1970 – 1980||Trending phase|
|1980 – 2001||Sideways phase (Time correction)|
|2001 – 2011||Trending phase|
|2011 – till now||Sideways phase (Time correction)|
|2022 onwards||Possible trending phase|
An interesting behaviour of RSI is seen since 1970. Whenever RSI has surpassed 50 but failed to surpass the 70 zone (overbought zone), it has continued its sideways consolidation. Two of such instances are highlighted on the chart with numbers 1 and 2.
But whenever RSI has surpassed 50, followed by the 70 zone, it has entered the decisive rally. Three such instances are highlighted in circles. In the present time, RSI has decisively crossed the 70 zone, sustained and forming higher tops higher bottoms (well above 50). Historical data suggests there is a bright possibility of a rally emerging soon.
Weekly chart highlighting patterns
It’s very clearly seen as a curve formation since 2011. As the curve formation is nearing the end, the price entered a symmetrical triangle formation, a small corrective pattern. Possible breakout (continuation) is likely in a couple of weeks, which is coinciding with all previous views so far.
Weekly Fibonacci Ratio
A symmetrical triangle formation is holding well above 38.2% retracement of the last massive incline. 38.2% is considered to be a healthy correction in an ongoing rally, which is happening alongside time correction (symmetrical triangle), confirming a minimum possibility of price decline hereon.
Weekly chart with Ichimoku Indicator
Ichimoku is a trending indicator. It highlights the present trend, future trend, and price action compared to the past and also highlights strength. The price crossed Ichimoku cloud during 2019 and sustained above the same since then. The trend still remains intact. Sideways consolidation since 2021 is forcing Ichimoku lines to juggle, narrowing cloud, which is supporting a directional rally (even a symmetrical triangle is suggesting the same) anytime.
Putting it all together
Monthly time cycle since 1970, relative strength on the monthly chart, curve and symmetrical triangle formation on weekly charts with Ichimoku trend confirmation alongside Fibonacci support, all confirm limited downside and potential new bullish rally for Gold soon. This time it may rally like never before, considering the Equity rally, monetary as well as fiscal situation so far.
Kindly note that the shared view is on high timeframe charts (mostly monthly and weekly). This helps to understand the upcoming cycle/move on a longer timeframe.
Follow me on Twitter @RambhiaKunal for regular updates!
Statutory Disclosure: Kindly note that this update is only for educational purposes. It is safe to assume that my personal position, my fund’s position, and my client’s, as well as relative’s position, maybe open on the counter. Prefer to take the advice of your financial advisor before initiating any position.