Ok so this is the gold spot price with the Ichimoku cloud. Now this does not really tell me anything that I didn't already know with my other indicators, but the advantage is that I can see at a glance where the gold spot price is in the trend. That is the whole idea of this method.
To break it down to just the bare basics.
- The green cloud shows me clearly that the overall trend is bullish.
- The price action is in the cloud which tells me that this is a consolidation phase.
- The bottom of the cloud is support at $1,280.
- Resistance is at the top of the cloud at $1,320.
- If the price breaks down through the green cloud then the next support is $1,240
The great thing about Ichimoku is that with my other indicators, I wrongly had support at $1,320 as a possible level where it might hold. If I had looked at the chart with the cloud, it would have been obvious that there was likely further downside towards the $1,280 support.
Now my slow stochastic is showing that the chance of testing the $1,280 support or the bottom of the cloud is very high. Lets just see which way it eventually breaks out of interest.
Below: Gold spot price with Ichimoku cloud.
When we look at the spot price we are not looking at demand. We are looking at sentiment. The demand for gold is at record highs. The spot price is the paper market. For every ounce of gold there is about 100/oz of gold paper contracts that are not backed by anything. The gold spot market is fractional just like the banking system. If gold is monetised again like many expect, this spot price will not matter anymore. Gold will be at least $7,000/oz. Until then we just wait. I think that the Fed will come out printing more than the $80 Billion that they have tapered from. It is just a matter of time. I think that we will look back on this and say this was the greatest bargain of all time. I am personally going to be buying more physical gold on the breakout of the top of the cloud. I held gold through the 90's when it was in a bear trend. My only regret is that I did not buy more during the 90's.
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