Gold Close to Confirming a New Breakout to All-Time Highs
Be prepared to go long gold once it is over $1630 per ounce and buy dips along the way up to $2300 into the summer of 2013.
We have seen gold drop as low as the $1520s during this expected eight to 13 month window. But at this time, it looks to me like a break over $1630 on a closing basis will put the nail in the wave 4 coffin. I expect gold to rally for about eight to 13 months into at least June 2013. Our longstanding target has been in the $2300 per ounce arena in US dollar terms. Some pundits have much higher targets in the $3,500 per ounce or higher area, but I am using my low end targets for reasonable accuracy.
This 5th wave up can be difficult to project because 5th waves in stock or metals markets can be what are called "extension" waves. This means they can have a potentially much larger percentage movement relative to the prior waves 1 and 3 of the primary bull market since 2001. You can end up with a parabolic move at the end of wave 5, where those $3000 plus targets are possible. I expect the 5th wave to be about 61% of the amplitude of wave 3, which ran from 681 to 1923, or about $1242 per ounce. If we were to apply that math, we come up with $767 per ounce of rally off the wave 4 lows. $1520 plus $767 puts us at $2287 per ounce, or roughly $2300 an ounce as a low end target.
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In summary, crowd behavior is crucial to the next coming movement in gold and it could be a sharp rally that catches many off guard, much like the downdraft last fall did to the bulls. Be prepared to go long gold once it is over $1630 per ounce and buy dips along the way up to $2300 into the summer of 2013.
Editor's Note: David Banister is the chief investment strategist and co-founder of ActiveTradingPartners.com, a small-cap portfolio and market advisory service.
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