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Where to Buy the Dip on Gold?

|Includes: Randgold Resources Limited (GOLD)
Fundamentally the case for the bull market in gold is only getting stronger; until global debt levels come down in a big way, or at least until any monetary authority chooses to address the debt problem, the case for gold only gets stronger. To put it simply, the only issue that matters is debt.

In light of that, the recent dips in gold constitute a discrepancy between price and value -- and thus offer an opportunity for investors/traders to profit from this discrepancy by buying the dip.  

To find key price levels to buy at, we can take a look at price charts -- see the daily chart of gold below. Key observations:

1. A head and shoulders pattern of sorts has formed, with the top of the head at approximately 1420 and the neckline at 1360. This distance of $60, projected to the downside from 1360, gives us a target of $1300 as a support level. 

2. This $1300 support level is near the 50% Fibonacci retracement level of the bull move up from near $1160 in the summer of 2010 to the recent highs above $1420. 

3. The 38.2% Fibonacci level of the aforementioned bull move is at 1324. This is also an area that proved itself to be a support level back in October of 2010. 

Zooming out to the weekly chart, there are two matters I find notable:

1. The price channel going back to 2008 is still intact, with the bottom trendline at just above $1280. By mid-March, the bottom trendline will be in the mid-1320s, a support level previously identified. A battle in March in the 1320s could thus prove to be important for determining the fate of gold, in terms of whether bears will gain momentum and advance to the downside or bulls will have formed their base for a stronger move upwards. 

2. The 30 EMA on the weekly chart, a moving average the gold market has repeatedly gone back to over the years during this run up, is now at approximately 1315. This strengthens the case for some support being found in the 1320 vicinity. 

Personally, I would expect some rangebound movement and a test of these levels before proceeding upwards beyond the previous highs. 

Of course, feel free to share your comments in the section below.

Disclosure: I am long PHYS.