Gold Bull Market Trend Forecast

TECHNICAL ANALYSIS OF GOLD [click to enlarge]

Chart Courtesy of Stockcharts.com

TREND ANALYSIS - The powerful break above the $850 previous high is a clear trigger that signals a significant rally, initially targeting the next high of $989. However, despite the increase in volatility, gold's most recent action has seen gold retrace to back below $900 in recent hours with last price at $880, which suggests a correction against the powerful rally is underway, targeting a retracement to a $850 breakout point.

The next resistance level above $989 is the $1033 March high, which given the vicinity to $989 would probably break soon after a break of $989. However, Gold resistance at $989 would target a retracement to support at the recent high of $926, with strong support in the range of $926 to $900.

Failure to break $989 would see gold continue to develop a sideways pattern in the range of $989 to $800.

Price Targets - The 2006 downtrend witnessed a decline of some 185 points, the subsequent rally to 1033 was up 490 points, or 264%. Gold also made an intermediate high at $850, up 308 from the low or 165% of the 2006 decline. The downtrend from 1033 to 740 represents a decline of 293 points. Therefore the two trend targets above the 1033 high are 1220 and 1516.

MACD - The MACD indicator is heavily oversold after registering a sustained bear trend of 6 months which is similar to the length of the downtrend experienced during 2007.

SEASONAL TREND - The recognized seasonal pattern for gold is for a rally from late July/early August into February. Clearly up until last week's action, Gold has been ignoring the seasonal pattern. However the recent catchup move implies that Gold is now targeting a trend inline with the seasonal pattern, starting a month late, suggesting a +/- one month up trend target for a gold of between late January to late March 2009.

ELLIOTT WAVE THEORY - The decline from the March 2008 high clearly indicates a simple ABC wave pattern, each of which were themselves comprised of abc waves. This strongly suggests that the decline was corrective, and therefore implies a 5 wave advance to above the 1033 March high.

Gold Forecast Conclusion - The immediate action suggests an ongoing correction towards $850. Gold has experienced a major significant breakout to the upside which is targeting a volatile uptrend to $989, on break of which Gold will target a new all time high of above $1200 by Feb. to March 2009.

A FAILURE to break above $989 and follow the forecast trend would imply a sideways trend in the range of $989 and $800 for probably the next 11 months, i.e. until the next bullish seasonal time period approaches.

Comments

[adan:]

very nice assortment of info

surprised and pleased to see the elliott wave info included too

thank you much

2008 Sep 24 08:35 AM

[adan:]

ps - could you do a follow up article with similiar info but re silver?

thanks!

2008 Sep 24 08:36 AM

[sorgmot:]

It is a tail of two semi worlds.

Europe (west of Russia) and the North American continent (above Mexico) and Japan are falling apart while the rest of the world is booming.

Of course China is a question mark as the plan seems to be to srink the population in half and then half again and etc. until the last person dies and India takes over.

The western Europe, USA, Japan economies have died and are now in paralasys under a toxic mushroom clood of dollar debt. Their governments want to explode their curremcies and their foreign debts. Their production costs and government taxes are exploding even as their consumer reeal income declines.

Currency ties of the winning half work to the Euro and $ and Yen will soon break. The winning half workd will use its Euro and US $ holdings to buy gold and back their currencies with it.

Forecasting is fun.

Good luck.

2008 Sep 24 09:52 AM

[GroundedKiwi:]

Analysis of emotion...good...of supply and demand....great...of lots of lines you drew on a chart and gave names to...really?

To quote Warren Buffett "the charts look the same upside down"!

2008 Sep 24 10:03 AM

[Larry House:]

Fundamentals trump technical analysis, in my view. Charts show what has happened; they are only predictive if the fundamentals of the assest support the price action. I look at our economic situation--level of government debt, decline in the dollar, etc., and to me the fundamentals make gold attractive for years to come, regardless of what the charts show.

2008 Sep 24 10:23 AM

[sorgmot:]

Berkshire Hathaway is a US $ debt leveraged common stock buy and hold fund which has performed poorly for its shareholders in the last decade. Take Googe, Apple, Research in Motion, gold and other mining companies for example that have returned to share holders at several times the rate Buffet has, and without leverage.

In a debate, always check the data before making a claim.

Good luck.

2008 Sep 24 11:45 AM

[tams dad:]

v interesting thank you, yes please sliver analysis most welcome also in the same vein

2008 Sep 24 03:16 PM

[leh:]

I'd argue that good technical analysis combined with market savvy trumps funnymentals any day. One savvy trader I follow called this recent gold rally within a day or two before it happened after watching the charts closely for the past month, looking for and expecting a final washout capitulation. He was dead on, and expects gold to be the strongest market sector going forward the next several months.

But it's also smart to go to Kitco and see what the big boys are doing. From what I read there, they've gone from net short to net long gold over the past month.

2008 Sep 24 03:33 PM

[Smarty_Pants:]

Eldorado
by Egdar Allen Poe
(for those who don't know, Eldorado is a mythical city of gold)


Gaily bedight,
A gallant knight,
In sunshine and in shadow,
Had journeyed long,
Singing a song,
In search of Eldorado.

But he grew old -
This knight so bold -
And o'er his heart a shadow
Fell as he found
No spot of ground
That looked like Eldorado.

And, as his strength
Failed him at length,
He met a pilgrim shadow -
"Shadow," said he,
"Where can it be -
This land of Eldorado?"

"Over the mountains
Of the Moon,
Down the Valley of the Shadow,
Ride, boldly ride,"
The shade replied -
"If you seek for Eldorado!"


Market conditions would tend to indicate that Gaily Bedight may actually reach Eldorado in the not-too-distant future.

2008 Sep 24 04:09 PM

[daveddawg:]

Excerpted from The Secret Poetry of Rep. Ted Poe

Remember him?the guy who wants to peg gold to $500. Wonder how that bill is working out?

There once was a Rep. named Ted Poe
He said give me your gold for some dough
An ounce for five C-notes
Its lower than spot quotes
This fiat on you I'll bestow

and

There once was a Rep. named Ted Poe
Sez five hundred is where price will go
I'll print up some T-bills
It'll cure all of your ills
It's better for gold to be low

2008 Sep 24 05:51 PM