Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
Gold Price During Hyperinflation - 12th May 21
Stock Market Extending Phase Two? - 12th May 21
Crypto 101 for new traders – ETH or BTC? - 12th May 21
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold on the Launch Pad

Commodities / Credit Crisis 2009 May 01, 2009 - 12:55 AM GMT

By: Guy_Lerner

Commodities

Best Financial Markets Analysis ArticleI love to chronicle my follies with gold.  Gold seems so easy.  The Federal Reserve runs the printing presses, and everyone in the world knows this is inflationary, and just like that, gold should be off and running.  But it isn't.  


But in retrospect, my gold exhortations haven't been so bad.  Back in August, 2008, I was less sanguine about gold primarily because I was bullish on the Dollar.  When others were bullish on gold back in February, 2009 -as in we are "going to the moon, Alice!" - I was stating that this was not the set up where gold should go higher.  This too was a good call.  The best I could muster was that gold would remain range bound. 

And range bound it has been, and we can see that in figure 1, which is a monthly price chart of a continuous gold contract.  The indicator in the lower panel measures the degree to which prices have become compressed, and presently, gold prices are compressed to a statistically significant degree. 

Figure 1. Gold/ monthly 

What we do know is this: compressed prices can lead to explosive moves in either direction.

What we don't know is this: what direction that it will ultimately be.

 

So this period of consolidation in gold (and most other assets) meets my criteria for a set up that can act as a launching pad for higher prices.  But it can also be a launching pad for lower prices, too.  

And that is the dilemma.  I wish I had an answer, but any technical indicator that I have for you would only be curve fitting in my opinion.  But all is not lost as the current set up offers a low risk entry for going long gold.

So let's take another look at the monthly price chart for gold.  See figure 2.  As long as prices stay above the pivot low at $884.80 on a monthly closing basis, I can remain constructive on gold.  Gold is now trading in the low end of its range.  When the bull market in gold began in July, 2001, gold has (almost) always closed above its prior pivot low point; this is a hallmark of a bull market -higher lows.  The lone exceptions to this rule are: 1) highlighted in the oval when the price of gold closed below the prior pivot for only one month before moving significantly higher and 2) highlighted by the red down arrows as this was the close below the prior pivot low point that effectively "killed" the bull market.

Figure 2. Gold/ monthly 

Now let's look at a weekly chart of a continuous gold contract.  See figure 3.  The breakout (price bar with red arrows) above the down sloping trend line has pulled back to support levels of the down sloping trend line and the pivot high.  This looks like a retest of the breakout (inside the oval), and in my "textbook" this represents a low risk entry point.  On this weekly view, a weekly close below $870.70 would like lead to lower prices.

Figure 3. Gold/ weekly

So let's summarize.  Gold is on the launching pad; gold is trading within a range and it is at the lower end of that range.  We accept the fact that we cannot predict the direction gold will take.  Prices could either breakout or breakdown from this range.  Once we accept this condition, I believe that the current price represents a low risk, well defined entry point.  A monthly close below $884.40 is bearish; on the SPDR Gold Trust (symbol: GLD) this pivot comes in at $86.65.  A weekly close below $870.70 is bearish as well; for the GLD this pivot is at $85.12.  

By Guy Lerner

http://thetechnicaltakedotcom.blogspot.com/

Guy M. Lerner, MD is the founder of ARL Advisers, LLC and managing partner of ARL Investment Partners, L.P. Dr. Lerner utilizes a research driven approach to determine those factors which lead to sustainable moves in the markets. He has developed many proprietary tools and trading models in his quest to outperform. Over the past four years, Lerner has shared his innovative approach with the readers of RealMoney.com and TheStreet.com as a featured columnist. He has been a regular guest on the Money Man Radio Show, DEX-TV, routinely published in the some of the most widely-read financial publications and has been a marquee speaker at financial seminars around the world.

© 2009 Copyright Guy Lerner - 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.

Guy Lerner Archive

© 2005-2019 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