Precious Metals: How Long Will the Bull Wave Last?

It's been a while since I showed a chart on the Amex Gold BUGS Index (HUI). The correction from the peak of 519.68 achieved in March has been nothing short of devastating. In the chart below, the HUI is examined in the weekly time frame that smooth out the higher frequency wiggles.

The journey from 285 to 520 is labeled wave i of 3 of III, a clear upward 5-wave impulse wave. The 3-wave down correction to the 50-week MA is equally recognizable. This wave assignment implies that the most powerful iii of 3 of III will arrive shortly, if it is not already here.

click to enlarge

I have to admit that I have sounded this alarm before - using earlier counts on the daily graph that in retrospect was totally off the mark (385 couldn't have occurred using under the previous counts). It does highlight the difficulty with labeling EW in real time. It's also a reminder that EW needs to be employed in conjunction with other indicators along with a rigid stop-loss discipline for successful trading.

I do have a high degree of confidence in the current wave count, however, since it's on a longer time-scale and the waves are more "classic" looking. I'm also heartened by the fact that gold spot made a bottom just below $850 - it's nominal high in the 80's. One positive for the patient gold investor is that the current bull phase now looks to extend, in time at least, until the end of 2008.

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You may wish to visit our site and click on commodities and then click on Moore to look at a variety of commodity normal scale graphs.

You will see that gold is not alone in its run up since 2002. And it is behind in the degree to which it has increased compared to other commodities.

We are linking our commodity price targets to 100 times their 1932 lows. That brings copper to $4.00 / pound and gold to $1,500.00 / oz. We believe that gold is now beginning wave 3 of a 5 wave up Elliott wave pattern finishing in 2010.

We believe that foreign currencies will also rise in US$ terms taking the Swiss Franc to 1.25 by the end of 2010. That would be 5 times its dollar value in the mid 1950's.

See your own investment consultant before you make investment allocations.

Good Luck.