#Gold The Three Trend Phases According to Dow Theory for OANDA:XAUUSD by Decodingthemarket

Last year the three trend phases were presented that were formulated by Charles Dow theory,
and it was concluded that gold crossing the resistance zone would mark entering a new phase.

Here again are the three phases of Dow :

1) Accumulation phase: In this first phase, the most informed, astute, and

contrarian investors buy. If the previous trend was downwards, then clever

investors can see at this point that the market has already discounted the “bad

news”. For gold , this phase lasted from 2013 to June 2019.

2) Participation phase: Prices are starting to rise slowly. Trend followers are

showing interest; news is improving; and commentators, the media, etc. are

increasingly optimistic. Speculative interest and volume are rising, new products

are being launched, and analysts’ price targets are being raised. This phase began

after gold crossed the resistance in June 2019 and could now last for several years.

3) Distribution phase: During this final, mania phase, the group of informed

investors who have accumulated from near the low point begins to reduce their

positions. Media and analysts outperform each other in raising their price targets,

and the environment is characterized by “this time is different” sentiment.

In my opinion the gold price is currently in the first third of the participation

phase. Investor demand will be the dominant factor driving the price, because gold

is apparently a Giffen good, especially in Western markets. As we expected last

year, the break above the resistance level at USD 1,360–1,380 has triggered

increased interest from institutional investors.

From the point of view of current market sentiment, seasonality , and the CoT

report, I would not be surprised to see a several-week “chill-out” phase at the

moment. However, I do not expect a deep correction, as great buying interest

appears to be waiting on the sidelines to “buy the dips”. The recent rise in the
relative strength of silver and mining stocks also gives confidence. Thus,

the conditions for the continuation of the new gold bull market seem excellent from a

technical point of view.

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