Best of the Week
Most Popular
1.Stock Market in DANGER of Strangling the Bears to Death - Nadeem_Walayat
2. Germany Pivoting East, Exit US Dollar, Enter Gold Standard - Jim_Willie_CB
3.Flight MH17 – Kiev Flash Mob's Last False Flag? - Andrew_McKillop
4.Stock Market Crash Nightmare! - Nadeem_Walayat
5.Gold - The Million DOLLAR Question... - Rambus_Chartology
6.Gold And Silver – BRICS And Germany Will Pave The Way - Michael_Noonan
7.The Jewish Selfish Gene, People Chosen by God, Everyone Else is Goyim to Kill - Nadeem_Walayat
8.The Israeli Promised Land Dream - The Criminal Roadmap Towards “Greater Israel”? - Felicity Arbuthnot
9.Which Way is Inflation Blowing? Watch Commodities - Gary_Dorsch
10.U.S. Economy Quarterly Review and Implications for 2014-2015 - Lacy Hunt
Last 5 days
Gold Price and U.S. Dollar’s July Rally - 28th July 14
Second Quarter Corporate Earnings: Marching Toward a Strong Economic Recovery - 28th July 14
Time to Put a New Economic Tool in the Box - 28th July 14
Mossad in Gaza, Ukraine and the Cult Of The All-Powerful Elite - 28th July 14
Elliott Wave Gold Price Projection Since 1970 - 28th July 14
Investors Remain Uncertain As Stock Fluctuate Near Long-Term Highs - Will The Uptrend Extend? - 28th July 14
The Mass Psychology Of Decline - 28th July 14
Will the US Destroy the World? - Don’t Expect to Live Much Longer - 28th July 14
GDM and GDXJ Gold Stocks In-depth Look - 28th July 14
Stock Market One FINAL High? - 28th July 14
What It Means - Paradigm Collapse And Culture Crisis - 27th July 14
Wall Street Shadow Banking: You Can’t Taper a Ponzi Scheme: “Time to Reboot” - 27th July 14
6 Tips for Picking Winning Gold Mining Stocks - 27th July 14
Israel's War on Children, Exterminating the Palestinians Future - 27th July 14
Guilt By Insinuation - How American Propaganda Works - 26th July 14
Surprise Nuclear Attack On Russia To Liberate Ukraine - 26th July 14
Use "Magic" Of Gold/Silver Ratio To Greatly Increase Your Physical Holdings - 26th July 14
Derivatives Market Species Origins - Abuse, Props and Risks - 26th July 14
Stock Market Manipulation and Technical Analysis - 26th July 14
China’s Stock Market Finally Looks Like A Buy - 26th July 14
Ed Milliband Fears Israel Jewish Fundamentalist Gaza War Massacres Backlash - 26th July 14
The Big Energy = Power Battle Is Coming - 25th July 14
USrael - Zionists in Control of America's Goyim Brainwashed Second Coming Slaves - 25th July 14
More Weakness Ahead for Gold Miners - 25th July 14
Gold Price Strong Season Starts - 25th July 14
Geopolitics and Markets Red Flags Raised by the Fed and the BIS on Risk-taking - 25th July 14
Gold Lockdown Until Options Expiry - New Singapore Gold Contract Threatens Price Manipulation - 25th July 14
The Bond Markets, Black Swans, and the Tiny Spirit of Santo - 25th July 14
No Road Map For Avoiding The Future - 25th July 14
Israeli War Machine Concentrating Women and Children into UN Schools Before Killing Them - C4News - 25th July 14
Israeli Government Paying Jewish Fundamentalist Students to Post Facebook Gaza War Propaganda - 25th July 14
Why the Stock Market Is Heading For A Fall - This Time Is Not Different - 25th July 14
An Economic “Nuclear Strike” on Moscow, A “War of Degrees” - 25th July 14
BBC, Western Media Working for Israeli Agenda of Perpetual War to Steal Arab Land - 25th July 14
Ukraine: What To Do When Economic Growth Is Gone - 24th July 14
Stock Market Clear and Present Danger Zone - 24th July 14
The Five Elements to Creating a Something-for-Nothing Society - 24th July 14
Instability is the New Normal? - 24th July 14
Israel's Suicide Bombers Over Gaza - 24th July 14
EUR-AUD Heads Into The Danger Zone - 24th July 14
Tesco Supermarket Death Spiral Accelerates as Customers HATE the Mega Brand - 24th July 14
Ukraine MH17 Crisis - Best Remember Who Your Friends Are - 24th July 14
Three Reasons Why Gold Price and Gold Stocks Will Rise - 24th July 14
HUI Gold Bugs Fighting To Break Downtrend - 23rd July 14
What Putin Knows About Flight MH17 - 23rd July 14
Why Microsoft Will Continue to Rebound, Huge Upside Potential - 23rd July 14
Will Putin Survive? - 23rd July 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Biggest lie in Stock Market History Revealed

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.


© 2005-2014 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