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Is Gold Taking the Stairway To Heavenly Prices?

Commodities / Gold and Silver 2011 Jul 19, 2011 - 04:06 PM GMT

By: Eric_McWhinnie

Commodities

It was a historic day for the financial markets on Monday. As the Dow (NYSE:DIA), S&P 500 (NYSE:SPY), and Nasdaq (NASDAQ:QQQ) headed lower, one sector continued its rally. Precious metals (NYSE:DBP) such as gold (NYSE:GLD) and silver (NYSE:SLV) surged higher on Monday.


Gold reached a new all-time high above $1600/oz, and silver climbed back above $40/oz. Ongoing default fears and currency devaluation continues to give investors a reason to hold precious metals. It also didn’t help that Moody’s (NYSE:MCO) is now suggesting that the United States simply remove the debt ceiling, in order to avoid default (despite S&P saying the US could still default with a debt ceiling raise). With the current monetary policy and confusion, it’s easy to see how gold reached a new all-time high, but let’s look how gold reached these new highs on a technical level.

Despite not being able to eat gold, investors still run to it in times of uncertainty. The chart below shows gold’s steady step ladder rise since the beginning of July. Gold’s rise on the chart is in a staircase pattern, which is known as a “swiss stair accumulation.” This technical formation is very bullish for gold. As you can see, the swiss stair formation has taken gold from $1480, to a new all-time high above $1600. In fact, gold has climbed higher for 10 straight trading sessions.

With gold’s historic run, investors may be wondering when a pullback may occur. Although the gold bull cycle is still intact, pullbacks do occur. Considering the swiss stairway formation on the chart, investors should be cautious if gold falls below $1576. This was the previous low of the last large step. If gold falls below $1576, the stairway will be in jeopardy of collapsing.

Investors looking to hold precious metals in their portfolio may want to consider gold plays such as AngloGold (NYSE:AU), Newmont Mining (NYSE:NEM), or Market Vectors Jr Gold Miners ETF (NYSE:GDXJ). Hot silver plays include First Majestic Silver (NYSE:AG), Endeavour Silver (AMEX:EXK), and Global X Silver Miners ETF (NYSE:SIL).

For more analysis on our support levels and ranges for gold and silver, consider a free 14-day trial to our acclaimed Gold & Silver Investment Newsletter.

Disclosure: Long AGQ.

By Eric_McWhinnie

http://wallstcheatsheet.com

Wall St. Cheat Sheet : Only days after the S&P 500 crashed to the depths of hell at 666, the Hoffman brothers launched Wall St. Cheat Sheet: one of the fastest growing financial media sites on the web. Like a samurai, our mission is to cut through the bull and bear shit with extraordinary insights, a fresh voice, and razor-sharp wit. We provide the highest quality education and information for active investors, financial professionals, and entrepreneurs.

© 2011 Copyright Eric McWhinnie - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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