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
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
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 Price Setting Up for a Massive Breakout in 2H 2013

Commodities / Gold and Silver 2013 Jan 18, 2013 - 10:32 AM GMT

By: Jordan_Roy_Byrne

Commodities

This piece expounds upon what we covered last week. In that piece, regarding Gold, we concluded:

If Gold is able to firm up here and now then it has a good shot to rally back to $1750-$1800 over the next few months. If we get the bullish scenario and a fundamental catalyst shift then expect Gold to break past $1800 in Q3. That would mean that Gold consolidated for two years which would be its longest consolidation on record. The longer the consolidation, the more explosive the breakout.


Following that editorial, we noted for premium subscribers that various sentiment indicators continued to look favorable even as the market began to make some progress. For example, the daily sentiment index for Gold touched 6% yet Gold didn’t make a new low. At the same time we saw a continued reduction in speculative long positions. Bloomberg reported that hedge fund long positions in Gold were reduced to the lowest level since August. Technically, take a look at the weekly chart. Gold seemed at risk below $1630 yet it closed above $1650 in each of the past four weeks. Now that Gold is starting to turn bullish all time frames (daily, weekly, monthly) it has a great chance to rally back to $1750-$1800 over the next few months and position itself one step closer to a breakout.

With that said, we want to show why Gold is setting itself up for an excellent breakout later this year. In the chart below we are focusing on two things: the price action and the volatility as measured by bollinger band width (bottom rows). Have a look.

Thus far Gold has experienced three major breakouts and four major consolidations. The type of breakout depends on the preceding consolidation pattern. The strongest breakouts are born out of consolidations which are tight in terms of price but long in terms of time. The 2004-2005 consolidation which lasted 20 months, fits that profile. It had the strongest breakout of the three. Meanwhile, the other breakouts weren’t too shabby.

The current consolidation is most similar to the 2004-2005 consolidation. It is 17 months old and will last two years unless it can blast through $1800 on the next try. Also, its tight range of $1550 to $1800 has remained in place. Furthermore, note the volatility on the various time frames (as measured by bollinger band width). Two of the three readings are at eight-year lows while one is at a five-year low. The last time all readings were at multi-year lows was in 2005.

Gold does have potential measured targets of $2,050 and $2,250 but in our view those are only initial targets. A target of $2,250 is only a 25% advance. Even a 40% move (less than the first two breakouts) equates to $2,500. This sounds wildly bullish but the technical arguments are there and we are counting on another six to eight months of consolidation before the initial breakout. That consolidation will serve to eliminate any marginally weak hands and replace them with ardent bulls. After a two-year consolidation, those on board would be looking for far more than $2,000 or $2,200.

Before I close, I’d like to note that I will be presenting at the Vancouver Resource Investment Conference on Sunday, January 20, 4:30pm at the Vancouver convention center west. This is a great opportunity to talk to analysts and companies face to face. This is a critical time in the precious metals sector. The market remains in consolidation mode and that will continue. Yet, the potential on the other side is vast. There is still time to uncover the stocks poised to be huge winners when and after Gold makes its next breakout.

If you'd be interested in professional guidance in this endeavor, then we invite you to learn more about our service.

Good Luck!

Email: Jordan@TheDailyGold.com
Service Link: http://thedailygold.com/premium

Bio: Jordan Roy-Byrne, CMT  is a Chartered Market Technician, a member of the Market Technicians Association and from 2010-2013 an official contributor to the CME Group, the largest futures exchange in the world. He is the publisher and editor of TheDailyGold Premium, a publication which emphaszies market timing and stock selection for the sophisticated investor.  Jordan's work has been featured in CNBC, Barrons, Financial Times Alphaville, and his editorials are regularly published in 321gold, Gold-Eagle, FinancialSense, GoldSeek, Kitco and Yahoo Finance. He is quoted regularly in Barrons. Jordan was a speaker at PDAC 2012, the largest mining conference in the world.

Jordan Roy-Byrne 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