Gold to $980 or Bust?

Adam Hewison over at MarketClub just put another free technical analysis video on gold that touches on possible cyclical patterns in gold on a monthly basis. He thinks gold will head higher until $980 or so where we'll see some resistance. In the diagram he points out a somewhat of a rounded stair-stepping pattern where gold will rally and then pullback, and then rally higher. So, while gold may be headed slightly higher, it will indeed face some resistance once it hits that $980 level and Adam thinks that could hit here soon in August. You can watch the video here.

While Adam has looked at the spot price of gold on his charts, retail traders/investors can play it via SPDR Gold Trust (GLD) or Comex Gold (IAU). We keep covering gold on the blog simply because we've seen quite a confluence of smart minds in the gold trade as numerous hedge fund managers are invested in the precious metal. While many of them use GLD as their vehicle (namely John Paulson), David Einhorn's Greenlight Capital recently switched to storing physical gold due to it being cheaper to store than the expense ratios they were paying with GLD. It will be interesting to see if other managers switch to physical gold as well. For people who don't have that option, we'd recommend playing GLD as it is the most liquid option in the markets. For more on technical analysis and charts, make sure to hit up our recommended reading list: technical analysis edition.

Comments

[chux08:]

GLD = paper gold

GTU = real gold

* Gold is true hard money.

* GoldTrust holds pure refined gold bullion.

* GoldTrust Units represent ownership of gold.

* Trust Gold with GoldTrust

www.gold-trust.com/

Jul 24 02:05 AM

[cameroni:]

I am on the side of the bust "Market Folly". Gold has been overplayed recently and I do think it will correct down in a significant way through this fall. We will see of course. At the moment thought there is no compelling reason for Gold to break the 980 barrier, never mind breaking through 1000. The time is not right. Not yet.

Gold will have it's day but not until the stars line up to make it happen.

Jul 24 03:28 AM

[DONE_SONZ:]

Yawn,and make the switch.

Jul 24 06:01 AM

[cameroni:]

You serious (and sometimes vociferous, even lunatic) Gold-bugs may not like to hear it but gold is set to fall this season and come September I will be proven 100% right. Just watch. Gold will fall. It is not my fault though so don't take it out on me. That is just how the market functions and I am calling it like I see it.

Jul 24 06:38 AM

[goldrealmny:]

Forget owning fractional shares of paper ownership of bullion. BE YOUR OWN CENTRAL BANK and buy silver and gold bullion yourself. Such as apmex.com It should be apparent that cash is a depreciating asset - Fed Notes have lost 97% (and counting) of its purchasing power since 1913 (thanks to removing gold and silver from the money supply!!)

Everyone should hold some cash as a % of their portfolio and gold and silver bullion are the only types of "cash equivalent" WORTHY of a discerning investor. IMO, it is prudent to have more than what "conventional wisdom" suggest to hold in precious metal at this point in time.

It will be better to be 2 years too early than 20 minutes too late when TSHTF. The Fed will (and IS) devaluing the dollar to deal with this debt deflation. Just like FDR did in 1930s when he devalued dollars by 70% vs gold. If you own paper gold - THE GUBMINT WILL CONFISCATE IT. But if you own your own.......

Jul 24 07:41 AM

[ScroogeMcduck:]

How about 1000 or bust?

Jul 24 08:56 AM

[sutski:]

With the UK and the US public finances in such dire straights, I am convinced we are looking at the start of another up-curve for gold as more and more people cotton on that a 70% decrease in consumer spending is gonna hurt and for a long time.... Other factors include if China or more funds buy into physical gold (which they seem to be doing still on the quiet), or other governments buy in (like Japan is doing on the quiet) , or more people start buying gold directly from places such as:

www.bullionvault.com/#...

to hedge and to hopefully even profit, we should see a continuing up trend. Also factors such as Mumbai and the CME announcing clearing services for London's over-the-counter gold forward contracts (from August 23rd 2009) should help add general volatility to the market ;) and the fact that gold production has already peaked around the world also would suggest a higher trend coming if only through basic supply and demand reasoning? It also appears that once us gold-bugs have bought in, we are very reluctant to sell out, so this would also support a continuing strength in gold value.

Click the jump above to check out Bullionvault and claim a free gram of gold just for opening a free account :) They won The Queens Award for Innovation last year (2008) and I have yet to find a better place for private people to buy and store physical gold. Their stats and spot price charts etc are also excellent.

Hey, good luck out there!!

Jul 24 09:27 AM

[Maxe Paul:]

We have all seen the movie, Eddie Murphy and Dan Aykroyd bidding up OJ futures before the inevitable, SELL MORTIMER......SELL!

Gold is the longest movie that's for sure, but it has an ending, make no mistake people.

Jul 24 11:00 AM

[HA65MPH:]

TO ALL...I am holding my own gold & silver , ..whats up with storage ?..geeze , if you own that much gold , you gotta have a 'secret place to 'bury ir !...forget gld , ...no etf`s for me ...jmho...glta

Jul 24 01:54 PM

[Bill40:]

There's a chance for deflation and if so, gold will likely go down. However, a country can not abuse its system of money forever without consequence.

Huge debt + Super-huge Unfunded Liabilities + Huge Current Deficits = Necessity That the U.S. Govt. Prints Lots of Money

Printing Money = Money That's Less Valuable

Gold = Something That Can't Be Printed

The reality of us living within our means has somehow escaped us as a nation. Reality may bite, but it can't be avoided.

Jul 24 02:42 PM

[Old Trader:]

This reminds me to overlay charts of GLD and/or IAU over the PM miners I hold to get a better sense of the correlation.

Jul 24 05:53 PM

[MadScientist:]

I am expecting a bounce off of $975 back down. We seem to be repeatedly testing the $980-1000 level. At some point it will go over this, probably when the $USD falls below 77. I am watching both right now - the momentum is clearly for short term gold appreciation as the dollar slowly falls.

Longer term - bullish
Intermediate term - unsure
Short term - bullish

Jul 24 07:05 PM

[mkreisel:]

There is no question that USD will go down the drain over the next several months.

Whenever Bernanke buys that MBS crap, the USD Index gets a jolt downward.

He bought $545 billion so far, and still has to buy $705 billion more before 2009 runs out.

Jul 25 03:37 AM

[cameroni:]

So.......

Gold is down 30 bucks since this article was posted. I said it would decline and with no hesitation at all stood by my assessment. Gold is still set for a further decline too. I still stand by those comments.

Do I really need to say "I was 100% right with that assessment"

Guess not. The record speaks for itself. Gold at 980 is a bust for now. Shake your heads. This is not the time for a gold price spike. It will come later. But not now.

Jul 30 03:03 AM

[MadScientist:]

Cameroni:

Good call - I made the same assessment (bounce back down off the $975 resistance level). It didn't even get that high, mostly because the USD had a short power rally this week.

I got out of my long position in UGL on Monday with only a loss of -0.25%. Now shorting via GLL. Still think that longer term gold is a good buy, but I'm not going to fight the short term trends.

Jul 30 11:26 AM

[MadScientist:]

UPDATE: Well, I am thinking now that I was too clever by half. Should have just stayed pat with my long position - gold seems to be range-bound between about $925-$975. Very hard to play the movements when they are as fast as they were this week.

Good luck to all.

Jul 31 02:58 PM

[cameroni:]

Don't worry Mad Scientist. Lots of guys are calling for a big upshot in Gold at any moment. Suggestions are that technical patterns tell us in no uncertain words to get on board the Gold elevator now. I beg to differ though.

Markets are about to correct down and that will boost the dollar again. Gold will decline and any sharp sell-off in equities will precipitate a reflective rout in gold. I understand the logic behind technical analysis but I also know it is only predictive and not a factual representation of what is actually about to come.

Fall will bring a whole litany of new troubles from housing to employment as summer workforces contract, home buying declines, students return to school and the farm season wraps up. I strongly believe the markets will react rather negatively to news we know is coming. As an aside, if consumer confidence remains tepid to weak leading up to Christmas there will be declining confidence in equities on anticipation of quarterly results ahead.

If anyone can provide good rationale as to why gold will spike above 1000 in this environment (prospects of increasing dollar and a downward equities correction) then I applaud they're gutsiness and contrarian views. I just don't see it though. Not yet anyway and so I will not buy back in unless things change. Gold seems range-bound lately but that could change abruptly and if there is a sudden market sell-off then the lustre will come off gold pretty quickly.

We are still deflating. Until that changes there will not be any good fundamental reason for a Gold spike except investor sentiment.

I do think panic will return to markets and caution others to backstop against losses on a regular basis. In particular I suggest all be wary of 9/9/09. There are a lot of superstitious buyer and sellers out there. End dates are not logical yet they affect markets all too often. Only the Gods know why.

Cam

Sep 02 09:12 PM