Best of the Week
Most Popular
1.UK General Election 2015 - Forecasting Seats for SNP, LIb-Dems, UKIP and Others - Nadeem_Walayat
2.UK General Election 2015 Seats Forecast - Who Will Win? - - Nadeem_Walayat
3.Gold Price Downtrend Looks Set to Continue - Clive_Maund
4.Commodity Prices Set To Plunge Below 2008 Lows - Austin_Galt
5.New Greece Drachma Revealed Amid Bank Runs - Greeks Buy Gold Sovereigns - GoldCore
6.Gold and Silver Stocks or General Stock Market Indices? - Rambus_Chartology
7.“Forgive Us Our Debts” – Only Way To Prevent Economic Meltdown - GoldCore
8.UK House Prices Trend 2015 and the May General Election - Nadeem_Walayat
9.12 Reasons Why Barry Ritholtz and Many UK Experts Are Mistaken On Gold - GoldCore
10.Recession is On The Way; Beat The Stock Market Crowd, Panic Now! - Mike_Shedlock
Last 5 days
Gold Price and Mining Stocks Decline Together - 3rd Mar 15
Financial Slaughter - The Silence of the Lambs - 3rd Mar 15
Bondholders “Bailed In” In Austria – New Banking Crisis? - 3rd Mar 15
How to Profit from the Coming Oil Price Crunch - 3rd Mar 15
Is Japan Zimbabwe? Could Japan go Hyperinflation? - 3rd Mar 15
Bill Gross Says Fed May Raise Rates 25 Basis Points in June - 3rd Mar 15
The Secret Behind My Hedge Fund Trade on U.S. Housing Market - 3rd Mar 15
BLS CPI Lie - How's That Dsflation Working Out for You? - 3rd Mar 15
Tesla Bonfire of the Money Printers’ Vanities - 3rd Mar 15
Gold Demand in UK, Europe and U.S. – Reuters Interview GoldCore - 2nd Mar 15
Watch the Skies... for Investor Profits - 2nd Mar 15
How Investors Can Identify the Best Small-Cap Stocks - 2nd Mar 15
Gold and Silver - What If the Precious Metal Stocks Bulls are Back - 2nd Mar 15
Students Getting a PhD in Subprime Debt - U.S. Debt Breaking Bad Part 3 - 2nd Mar 15
The Stock Market is in The Process of Major Top! - 2nd Mar 15
Stock Market Weakening Trend - 2nd Mar 15
Gold Price Glimmer of Hope - 1st Mar 15
Stock Markets Are Riding High on Thin Air - 1st Mar 15
Varoufakis vs. the Troika - Showdown in Athens - 1st Mar 15
Subprime Rising - U.S. Debt Breaking Bad Part 2 - 1st Mar 15
Gold CoT Improving, But ... - 1st Mar 15
UK General Election 2015 Seats Forecast - Who Will Win? - 28th Feb 15
UK General Election 2015 - Forecasting Seats for SNP, LIb-Dems, UKIP and Others - 28th Feb 15
Stocks Bull Market Continues - 28th Feb 15
U.S. Debt Breaking Bad - 28th Feb 15
NATO Frankenstein - When Centralization Scales Beyond Our Control - 28th Feb 15
Gold And Silver Insanity Prevails; Precious Metals Without Direction - 28th Feb 15
Fed Raising U.S. Interest Rates - Shovelin’ Schmitt Against the Tide - 28th Feb 15
Don't Let This Stock Market Myth Cost You Your Gains - 28th Feb 15
Recession is On The Way; Beat The Stock Market Crowd, Panic Now! - 28th Feb 15
Stock Market Indexes Creeping Towards the Edge - 28th Feb 15
GGD Going for Mexican Gold - 27th Feb 15
Foreign Real Estate Is the New Swiss Bank Account - 27th Feb 15
10 Reasons Washington Has War Fever - 27th Feb 15
Gold and the Euro Tragedy, Iraq 3.0, Ukraine Conflict Three Ring Circus - 27th Feb 15
Deepak Chopra - New Age Genius or Bullshit Expert? - Video - 27th Feb 15 - Videos
New Greece Drachma Revealed Amid Bank Runs - Greeks Buy Gold Sovereigns - 27th Feb 15
Will Month Long Stocks Rally Continue? - 27th Feb 15
The Only Public Hedge Fund You Should Own - 27th Feb 15
UK House Prices Trend 2015 and the May General Election - 27th Feb 15
Why America is Ungovernable - The Republicans’ Civil War - 27th Feb 15
Gold vs Gold Stocks: Bullish Anomaly Developing? - 27th Feb 15
I Heart Capitalism, Nasdaq Stocks, Then And Now - 27th Feb 15
The Fed’s History of Assassination - 27th Feb 15 i
Gold Bull Market Forecast - Money Will Rotate Into These Dead Investments - 27th Feb 15
"Audit the Fed"? We've Already Done That (Well, Kind of) - 26th Feb 15
Forget Peak Oil; Worry About Peak Demand - 26th Feb 15
Currency Wars, Again - 26th Feb 15
The Fed Waited Too Long: Here Comes Inflation - 26th Feb 15
Investing Inertia Won’t Keep Your Cash Safe - 26th Feb 15
The Net Neutrality Scam - 26th Feb 15
Will Conservatives Out of Control Immigration Crisis Boost UKIP Election 2015 Prospects? - 26th Feb 15
EU Warns Ireland and Euro Zone of Debt Dangers - 26th Feb 15
Commodity Prices Set To Plunge Below 2008 Lows - 26th Feb 15
Ukraine Hyperinflation as Currency Plunges 44% in One Week! - 26th Feb 15
The State of the Global Markets 2015 - 53 Page Report - 26th Feb 15
NASDAQ New 15 Year High - Stock Market Death By Overdose - 25th Feb 15
12 Reasons Why Barry Ritholtz and Many UK Experts Are Mistaken On Gold - 25th Feb 15
Sugar Commodity Price To Sweeten Up - 25th Feb 15
Investor Profits from China 2,000-Year Unstoppable Trends - 25th Feb 15
How to Borrow Cheaply from a Government-Owned Bank - 25th Feb 15
Debt Be Not Proud - 25th Feb 15
Liberal Democrat Election Blood Bath - Could Nick Clegg Lose Sheffield Hallam? - 25th Feb 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The State of the Global Markets 2015

Gold the Only Best Bull Market in Town

Commodities / Gold and Silver 2010 Jan 31, 2010 - 02:56 AM GMT

By: Douglas_V._Gnazzo

Commodities

Diamond Rated - Best Financial Markets Analysis ArticleGold is trying to carve out a bottom, as it fell 11.20 for the week, closing at $1081.50 (-1.02%). Downside momentum has lessened from last week’s 3% decline.

The big question now is: where is gold going to from here? No one knows for sure, but let’s take a look at where it is, and where it has come from, in order to determine the most probable scenario going forward.


The following chart gives a long term perspective on gold – covering the start of its bull market until the present. It is a monthly chart that rises from the lower left to the upper right: a bullish signature.

The chart confirms that gold is in a long term bull, making recent all-time highs in December, from which it has corrected about 12%. For a different perspective on this decline, let’s look at some past price action.

Up next is a chart that goes back to the beginning of 2008, when gold made a new high at $1033.90; and its subsequent decline into the Oct. low of $681.00. This was a 34% correction.

From the $681 low, gold then rose to $1226 – for an 80% gain. Presently, gold has corrected about 12% off its all-time high.

Needless to say, gold has performed better than any other asset during the last decade, especially in regards to maintaining purchasing power (value or wealth). Gold has made large moves in both directions, but the trend is from the lower left to the upper right of the chart – a bullish trend: higher highs and higher lows, ascending in stair-step fashion. 

The chart below shows gold’s price action from the July low, up to the December high, and the subsequent decline, which appears to be forming an A-B-C corrective pattern. Price is presently testing its 50% fib retracement level. Further below is the 62% area (1027), and major support lies at $975-$1025.

Since April we have discussed the possible inverse head & shoulders pattern that was forming, which projected upside potential to $1300 – if the formation broke out and was confirmed.

The next chart shows that in Sept. - Oct. gold broke out and advanced to $1226, not far from the projected high. Many investors are disappointed that the $1300 price was not reached. Some analysts view gold as being weak because it did not advance to the $1300 target.

Be that as it may, it is what gold does from here that will determine if it is strong or weak – not whether some theoretical upside target was reached or not. There are many ways to skin a cat; and gold has numerous ways it can continue to sustain its bull market.

On the chart below are two sets of Fibonacci retracement numbers. The blue set rises from the Oct. 2008 lows and extends up to the recent high at 1226. Notice that the 38.2% Fib level is at $1018.19.

The red set of Fibs extends up from the April low, to the all-time high at 1226.00. Price is presently testing the 38.2% Fib level of this series, with hints it may test the 50% level.

Of particular interest, however, is the yellow band that indicates where the blue 38% Fib level overlaps with the 62% red Fib level: the area around $1020 - $980.

When two different Fib levels intersect like this, it can mean that the overlap marks a significant support level. Since the inverted head & shoulders formation broke out, and the subsequent correction ensued, I have maintained that it would be of no surprise if gold corrected back to the $1000.00 level.

This does not mean it will. The charts simply show that it is possible and would be no big deal, as long as the support area ($950-$1050) holds. Gold will simply move from weak to strong hands.

Gold Stocks

Gold stocks, as represented by the GDX index, got whacked once again this past week. Fortunately, to regular readers, this was no surprise. I have warned that if the stock market turned down, as expected, while at the same time gold continued to correct, as suggested; that it would be bloody hell for the pm stocks, and unfortunately it has been. We may, however, be closer to the end than the beginning, which is good news.

For the week, the GDX declined over 7% and is down 26% from its recent highs made in November, just three months ago. This is a decline that one would be better off not sitting through. The train that supposedly leaves everyone standing behind at the station has not yet done so since the gold bull began. Markets go up and markets go down – that’s what they do. It is best to stand aside when they go down 26%.
Let’s take a look at what the GDX (pm stocks) has done in the last year or so, to get a better perspective on what might happen going forward. The next chart shows the GDX falling 72% from its 2008 high – an abysmal fall into the Oct. to Nov. lows.

The second chart shows the GDX rising 265% from its 2008 low to its recent high, which just fell short of its 2008 high. This is a perfect example of why one wants to step aside of serious declines: even a tripling of price from such lows, only gets one back to “even”. 

Now, after rising 265% in about a year’s time, the GDX has corrected 26%. As the third chart below shows, price has retraced to its first Fib level (38%) coming out of the 2008 low.

Last week’s report stated:

Price has dropped well out of it rising price channel and below lower horizontal support at 44, suggesting the Nov. low may come under fire. The first Fib level (38%) comes in around 40. If an intermediate term correction is unfolding, this is the likely target.

As the chart shows – the GDX closed the week out at 40.72 and it’s still possible more downside action is waiting. A lot depends on what the stock market does from here.

If the overall market goes down, it will put a headwind to the pm stocks; especially if gold corrects further, which brings the dollar’s direction into the picture. A follow through of the dollar’s rally will be hard on stocks, commodities, and gold and silver.

The above excerpt is from this week’s full market wrap report available at the Honest Money Gold & Silver Report website. All markets are covered: stocks, bonds, currencies, and commodities, with special emphasis on gold and silver. Stop by and check it out. A free trial subscription is available by visiting the site or emailing: dvg6@comcast.net.

Good luck. Good trading. Good health, and that’s a wrap.

Come visit our website: Honest Money Gold & Silver Report
New Audio-Book Now Available - Honest Money  

Douglas V. Gnazzo
Honest Money Gold & Silver Report

About the author: Douglas V. Gnazzo writes for numerous websites and his work appears both here and abroad. Mr. Gnazzo is a listed scholar for the Foundation for the Advancement of Monetary Education (FAME).

Disclaimer: The contents of this article represent the opinions of Douglas V. Gnazzo. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Douglas V. Gnazzo is not a registered investment advisor. Information and analysis above are derived from sources and using methods believed to be reliable, but Douglas. V. Gnazzo cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. This article may contain information that is confidential and/or protected by law. The purpose of this article is intended to be used as an educational discussion of the issues involved. Douglas V. Gnazzo is not a lawyer or a legal scholar. Information and analysis derived from the quoted sources are believed to be reliable and are offered in good faith. Only a highly trained and certified and registered legal professional should be regarded as an authority on the issues involved; and all those seeking such an authoritative opinion should do their own due diligence and seek out the advice of a legal professional. Lastly Douglas V. Gnazzo believes that The United States of America is the greatest country on Earth, but that it can yet become greater. This article is written to help facilitate that greater becoming. God Bless America.


© 2005-2015 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

Free Report - Financial Markets 2014