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Gold Ready to Attack Prior Highs in the $1,900s


Gold has been moving in defined patterns for 10 years now and has about three years left in a 13-year bull cycle.

It's been several weeks since I've written about gold, and we have had a wild ride since the $1,910 to $1,920 highs in August. At the time as we approached, I forecasted a major correction was nigh and we were shorting the rise from $1,862 to $1,910 prior to a huge $208 drop that took place over just a few days. We covered our short at $1,725, and then gold rallied back to a double top at $1,920 and then fell back to $1,531.

That pullback to $1,531 qualifies as a Fibonacci retracement of the 34-month rally from $681 to $1,920 and would also qualify for a price low for a fourth major wave correction that I discussed in prior forecasts. My initial targets for the gold pullback were $1,480 to $1,520 if the $1,650 area was violated. Most recently, gold has run up to $1,681, which is another Fibonacci resistance zone, a few times and then back off to the low $1,600s.

With the recent push over $1681, we can now confirm the fourth wave is over at $1,531 lows and that the fifth wave is likely in the very early stages but beginning to build steam. I will say that we want to make sure the $1,650 to $1,680s areas are defended by gold on any pullbacks in order for this forecast to remain valid. During this fifth wave up, eventually we should see the $2,380 ranges in gold, but it will not take place overnight. In the next few months, I am looking for gold to attack the $1,900 range, possibly even by year end, and then in 2012 attacking the $2,000-plus ranges.

With all of the macro events in Europe changing on an almost daily basis, the whipsaws in both the precious metals and equities markets are difficult to forecast and trade for most investors. However, gold has been moving in defined Fibonacci and wave patterns for 10 years now, and has about three years left in a 13-year bull cycle if I'm right.

Below is the updated weekly chart of gold. You can see prior lows as they related to oversold indicators, and where we just came off the $1,531 lows and its Fibonacci pivot along with the oversold indicators below.

Look for Gold to attack $1,775 first, then $1,800, $1,840, then $1,900 in the coming six to 10 weeks or so.

Editor's Note: David Banister is the chief investment strategist and co-founder of, a small-cap portfolio and market advisory service.

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No positions in stocks mentioned.

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