Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Breaks Above $1,000 an Ounce, What’s Next?

Commodities / Gold & Silver 2009 Sep 09, 2009 - 07:49 AM GMT

By: Claus_Vogt

Commodities

Best Financial Markets Analysis ArticleYesterday, gold broke the $1,000-an-ounce barrier, after rising from $950 per ounce last week.

It was the precious metal’s fifth run-up to the round number. And now there are many signs indicating that yesterday’s decisive break is of major importance.


Take a look at the following chart …

As you can see, from November 2008 through February 2009, gold rose from around $700 to nearly $1,000.

This breakout of a huge triangle is a clear technical buying signal.

The ensuing consolidation took six months … and ended last week. This consolidation has the form of a triangle, which typically confirms a trend.

With last week’s strong breakout above the upper boundary of this triangle, a clear buy signal was generated. And that explains gold’s move above $1,000.

Now, Momentum Indicators and Price Targets Point to More Gains Ahead …

The high momentum of this move is bullish. In spite of this healthy thrust, medium-term momentum indicators are not yet overbought. As you can see in the lower panel of my chart above, the price momentum oscillator (PMO) is still in neutral territory and just starting to turn up. In my opinion, that means there is a lot of room for additional price gains.

Sentiment indicators point in the same direction. Last Thursday, the Hulbert Gold Newsletter Sentiment Index stood at just 25.2 percent, which is a very low reading. During gold’s previous rallies to the $1,000 mark, this sentiment indicator stood at 61.8 percent on average. The high skepticism greeting the current rally is very bullish from a contrarian standpoint.

So how high could gold go from here?

Well, the width of that triangle formation can be used to calculate a minimum price target. It’s around $1,100.

A 10 percent move may not sound too exciting, but it’s just a minimum target. Plus, there is a very important additional message coming with this price target …

A Rise Above the Resistance Is Extremely Bullish

You have to step back a bit and look at a longer-term gold chart to realize the significance of a clear break above the resistance zone around the $1,000 level.

Here’s a weekly chart …

This huge triangular breakout is also an unmistakable technical buying signal.

As you can see, gold started a huge consolidation period in March 2008. It reached a low of approximately $700, which is a clear support area. Then it moved back up to the $1,000 level.

This whole movement can be seen as nothing more than a typical correction taking place during a long-term uptrend.

A break above its upper boundary around the $1,000 level signals the end of this huge consolidation and the start of the next medium-term uptrend.

The minimum target of this larger formation amounts to $1,300. And since gold is in a long-term bull market, I see even this area as just an interim target.

Longer term I expect much higher prices. Here are the reasons why:

Numerous fundamental factors all but guarantee higher gold prices.
Numerous fundamental factors all but guarantee higher gold prices.
  • As a consequence of the current financial and economic crisis government debt is going through the roof — not just in the U.S., but all over the world.
  • Worldwide central banks are printing money like there is no tomorrow.
  • Gold demand is rising due to rising wealth in emerging economies where the yellow metal is still favored as a store of value.
  • Gold supply is stagnating or even slightly shrinking — despite the metal’s price rise since 2001. This is because it’s getting ever more difficult and expensive to get gold out of the earth.
  • Finally, central bankers who were very eager to sell government gold at much lower prices a few years ago are getting increasingly reluctant to keep doing so. Emerging market central banks are even buying.

So with this important technical breakout now behind us, and these fundamentals in place, I expect the long-term bull market to continue. Much higher highs are very likely.

Best wishes,

Claus

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in