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Is Gold Ready to Start a Run to All-Time Highs?

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Here's what we can continue to watch for clues as to when this new uptrend begins.

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Just under two weeks ago I updated my readers with a chart pattern on the SPDR GLD Shares (GLD) ETF, and in that update I discussed what to look for to find clues in this gold consolidation that has continued from last August-September highs.

My theory all along has been that we peaked in a "Wave Three" top at 1900-1920 last fall after a Fibonacci 34-month rally from $681 per ounce. The ensuing corrective patterns are part of a normal "Wave 4" consolidation that works off the sentiment and overbought nature of that wave 3 updraft. Following this consolidation, I fully expect gold to continue past the $1,900 per ounce area and run to $2,300 per ounce or higher in a Wave 5 rally into the summer of 2013.

What can we continue to watch for clues, though, as to when this new uptrend begins? Specifically a close over 158 on the GLD ETF (About $1,630 on the gold charts) would confirm that the wave 4 lows are in at the $1,520 area and the early stages of Primary wave 5 to the upside have begun. The only downside risk I have near term between now and October is that if we drop below 153 on the GLD ETF, it would likely point to GOLD dropping to the $1,445-$1,455 per ounce area, the same low target I have had for nine-plus months now as the worst-case downside.

My suggestion would be to start scaling into long positions on a break over 158 on the GLD ETF and adding on pullbacks along the way up. If we can't break 158 then I'd say to sit back and watch before acting.

Below is the chart I completed about 10 or so days ago, and I continue to use it as a short term indicator for the next leg up or down. Eventually, gold will run to all-time highs, I simply would like to time my entry and reduce my risk as much as possible.



Twitter: @activetrading

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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No positions in stocks mentioned.

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