Is Gold Ready to Start a Run to All-Time Highs?
Here's what we can continue to watch for clues as to when this new uptrend begins.
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.
Editor's Note: David Banister is the chief investment strategist and co-founder of ActiveTradingPartners.com, a small-cap portfolio and market advisory service.
Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.