HSBC technical analysts are bullish on gold.
“The US dollar price of Gold is in an uptrend with a bullish Elliott Wave structure,” said Murray Gunn, HSBC’s head of technical analysis.
“With momentum turning up we open a long position at a spot reference of $1,260. A stop-loss is set at $1,200 with an initial target of $1,500.”
Gold was trading at around $1,261 an ounce on Tuesday morning.
Gunn’s analysis is formulated based on something called the Elliott Principle, a form of technical analysis that believes investors move between periods of bullish and bearish thinking in a reasonably consistent pattern.
Or as HSBC puts it:
Elliott’s Wave Principle is based on his empirically derived discovery in the 1930s that market prices move in recognisable, repeating patterns and that these patterns reflect a basic natural harmony manifested in the inherent herding behaviour of crowds. Elliott discovered that these crowd behaviour cycles appeared at every time scale and whilst they were repetitive in structure they were not always repetitive in amplitude or the time taken to form.
By this principle, bullish sentiment moves prices up in five moves of alternating peaks and valleys, eventually pushing prices to a new high. This is followed by three bearish moves pushing prices lower.
In addition, Gunn is relatively bearish on all major global stock indexes including the S&P 500 and FTSE 100. In terms of sectors, the analysis is significantly bearish on US motorcycle manufacturers, agricultural products, and apparel retail. It is significantly bullish on no sector of US stocks.