The Great Gold Recovery, Part 2: A Fascinating And Completely 'Innocuous' Trend In Gold

by: Han Jun Low

My apologies for not writing much this week; I had decided to put it off until I could observe if there was any logical foundation to support my hypothesis that there was a predictable trend in the gold spot.

Although gold had "crashed" slightly to around 1350 within a day of my original prediction, we observe that once again it has ended on a high. If, like me, you had been maniacally staring at the gold spot charts until your eyes bled wine, you would have also noticed that 'once again' is a statement that you could make regarding every week of this bull-run in gold.

The trend is simple: first, gold starts the week high, it crashes near the beginning-to-middle, and ends high (higher than the week's low, often higher than the week's high and certainly in a spectacular manner). Don't take my word for it; spot quickly rose at the beginning of trading on the 19th of August, Monday, crashed on the same day until it had reached a low of around 1356 on Tuesday (a figure that had been predicted by UBS on the very same Tuesday, how very insightful of them) before rallying and mini-crashing once more to about 1355 on Thursday, before mini-rallying again and finally shooting up today all the way to 1397! The following chart will express my thoughts regarding the sudden 15-minute miracle for gold:

(Click to enlarge)

Although there is plenty of cause for celebration among gold bulls, the cynical side of me had already anticipated this "unexplained phenomenon."

Observe the chart below and watch for the plateaus which signify periods when trading stops for the weekend:

(Click to enlarge)

Inexplicably, just before the weekend, there is a crash which is quickly followed by a surge in price. What could possibly be causing these unusual and clearly coincidental market-related adjustments ... ?

Well, there's more; this pattern was present a mere two weeks since the market had bottomed on the 28th of June. You see after the bottom, it had rallied greatly, and that rally was nearly contained by the 6th of July (the weekend just following the bottom, which had been the second lowest price for gold in recent memory) but for some reason, after it was observed to be rather difficult to get it below the all-time low, it seems the market had decided to take the opposite route.

(Click to enlarge)

Could all this be a mere coincidence? Perhaps, but wouldn't you agree that flying monkeys is quite simply one of the best metaphors for the rise of gold? Swift, sudden, and quite possibly at the beholden of an evil entity. If only water were an effective remedy to free those monkeys.

Han's Gold Mining Summary (at the time of writing): Sibanye Gold (NYSE:SBGL) went down 6% for apparently securing its position as the largest producer of South African gold via the acquisition of Gold One's Cooke mine (Hmmm), but other gold stocks that I hold including Harmony (NYSE:HMY), Newmont (NYSE:NEM), GoldCorp (NYSE:GG), Kinross Gold (NYSE:KGC), IAmGold (NYSE:IAG) and Silver Wheaton (NYSE:SLW) among others have done very well indeed thanks to today's performance. The Gold Juniors (NYSEARCA:GDXJ) have done particularly well (4.5%), beating out its next nearest contender IAG (4.25%).

Disclosure: I am long (IAG), (NEM), (KGC), (GG), (OTCPK:ZIJMY), (SBGL), (SLW). I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.