Gold has pulled back a bit after a sensational advance of more than $200, from $1,061 to $1,264, since the start of 2016. The gold price has corrected back below $1,200, finding support at $1,191 and bouncing back above $1,200. This bounce off support was a very encouraging sign, because $1,191 was the high from October of 2015 and it is bullish when previous resistance turns into support.

gold price chart

Zooming in closer on the updated chart from Kitco, we can see that the gold price bounced off this key support level at $1,191 and is moving higher. This is bullish not only because this price level was prior resistance, but also because it establishes a higher low on the chart (if it holds up). The prior low from which the gold price bounced was $1,182.

gold s:t

Gold is currently trading at $1,205 as the dollar rally has fizzled. Of course, we still need gold to make a new higher high above $1,264 before we can confirm the bullish technicals. But the bounce off $1,191 is reason enough for me to buy the dip and add to our positions in the GSB portfolio.

Aside from the FED walking back rate hike aggressiveness, hedge fund money flowing into the gold market, skyrocketing investment demand, the double-top pattern in the USD and technical buy signals, gold should also get support from the increased geopolitical tensions in the Middle East.

It is being reported that Turkish forces are massing along the border with Syria, and the largest “military exercises” in the history of the Middle East are being held in northern Saudi Arabia. Turkey and Saudia Arabia want Assad out of power, but any move to topple him would certainly involve a confrontation with Russian forces operating in Syria.

Those that are more risk-adverse may want to wait for confirmation that $1,191 gold will hold up. But I am going to dip my toes here, purchasing more physical bullion and adding at least one new mining stock to our portfolio. The odds that gold has bottomed continue to increase. If the gold price were to dip one more time and test $1,000, I think it will prove to be a short-lived buying opportunity. Either way, the upside potential at this juncture dwarfs the downside risk in my view.