The Gold Market

Gold and Silver Commodity Trading Editorials and News

Is this still a Unique Situation ? Answer : In my opinion YES. How can this be so with the recent run being so advanced and the 200 day M.A. lagging so far behind ? The 200 day M.A. in the past has acted like a magnet to draw prices to this mean so how can we have a Unique Situation in place ? Suggest you read my past three articles to try and find the answer. Some technical positive convergences were noticed and a comment made that this will not be repeated any time soon.

My latest observations appear to indicate that the 200 day M.A. gravity is loosing it’s traction. How is this possible ? There appears to be an opposite magnetic force that is equal to if not stronger that is attracting the 200 day M.A. up instead. It is like going to another planet’s gravity pull after overcoming the earth’s that makes this a Unique Situation.

Meanwhile enjoy the ride and stop worrying about gravity for it is now pulling upwards and not downwards as the old magnet has likely been replaced by a new one which I believe is much stronger in intensity.

TRULY A UNIQUE SITUATION.

Roland

Gold : Gee looks like the King of Metals or Real Money for the Kings has a mind of its own. Against opinions from some Market Experts, Gold has shown its glitter. It is getting brighter with each passing day. On that score, it appears to be targeting $500 per ounce. It is not the intention of this article to predict each move. Technicians should be aware that we follow the market and let it tell you where it is going … I believe that the formation is telling us that it is headed to the “moon.” Why ??? Gold has been periodically building cup and handle formations in its climb. Looks like the $500 and the all time historical high may also qualify as lips/neck-line of this type of formation. If this is so and I believe it to be, please do your own due diligence and check pass records to determine the result of this type of foundational formation. You will find the results of your search quite refreshing & reassuring … It should show it going to the “moon.” The odds are extremely high. Bottoming after 21 years is a bonus. Some experts and I am not one of them call it a chance of a life time … truly a “Unique Sityation.” You may like to check the much talked about Tech Stocks and see if it matches.

Silver : Briefly broke the $6.80 support and quickly left the faint hearted behind. It has regained its 200 day M.A. support and is poised to follow Gold’s ascent. History shows Silver to be slow of the block. It plays catch up pretty fast when trending and proceeds at its own pace. Maybe a characteristic of a Prince as Silver is Real Money for the Prince … more spirited and wild being younger in my opinion. Strangely Silver also bottomed after 21 years … coincidence or a ” Unique Situation ” … you decide.

Did the delay in the bounce invalidate the Unique Situation existing on July 12 2005. In my opinion, the answer is a resounding ” NO. “

Gold : Smartly held on to its about US$415 support against ” odds.” It found support at about US$418, a higher intermediate low, which is Bullish. On a closer look an ” Inverse Head & Shoulder ” formation is in place and its price on a close is higher than the neckline which is Bullish.

The existing Unique Situation is certainly looking prettier with each passing day.

Silver: I neglected to mention that the Unique Situation also exists for Silver in my recent posting. Like Gold it held on to its US$6.80 support. Not unlike Gold it appears to be getting more Bullish as time pass. It has since formed two higher intermediate lows and higher highs. In recent past Silver made impressive runs after making similar formations around the 200 day M.A. In my opinion it appears to be primed to do the same and is now trading above its 200 day M.A. before Gold.

Is Gold & Silver headed for new intermediate highs? It sure looks determined to try. The ” Cat ” appears to be alive and well. Oops … only time will tell. If it succeeds it will be a long while before before we see a similar Unique Situation.

Expect volatility & corrections on the way to its goal as it won’t be a smooth ride up. Enjoy the ride … making money is only part of the fun. I believe that these are early days for this ” Young Bull. “

TRULY A UNIQUE SITUATION !!!

The article serves to outline a series of my observations which may be useful in deciding on the direction of the next move of the market.

1) Gold is still in its Bull phase.

2) Price is just below its 200 day M.A.

3) Price is sitting relatively comfortably above the support of its smaller falling wedge formation.

4) Despite price rising from about US$422 to $428 and closing at its lows on a Friday, the price has steadily clawed back to US$427 as I pen this article. ( pm Asian time. )

5) On my charts which may not be accurate, it appears that the price at US$427 is breaking out from its very short term downward trend.

6) A Commex close tonight at this level or higher on spot basis may confirm a positive crossover on the daily Slow Stoc & Macd.

The scene appears set for a tradeable bounce or is this a turning point on the way to establishing a new intermediate high ? I find the set of above circumstances posted as 1-5 existing at about the same time frame most unusual. Is this pure coincidence or is it saying something more ? I am also curious to why its price is just about $7 from breaking out of the resistance of the larger wedge formation which it failed to do a while back.

Will this prove the old idiom that ” Curiosity Kills The Cat “. Time will tell …

Roland

It sure was a wild ride in the gold market last Friday. I spoke about ‘fireworks’ in the Gold market over at the sister site to this one… and fireworks it was, but to the downside. Considering that the gold market since the early part of this year has been quite boring and lackluster, the jump in volatility is somewhat refreshing and at the very least provides us with a hint that some real directional change is about to take place. I gotta tell you, I hate nothing more than a slow, sloppy, sideways non-moving marketplace!

But the question that beckons us now is whether or not this move in gold is a solid down signal and indication of trend persistence, or simply a fakeout and shakeout.

The shakeout theory sure is an interesting one. Over the course of the last 2 weeks or so I have been studying the forex market and the various currency pairs so that I may become more familar with it to the point where I can write intelligible technical articles on it. In particular I noticed an extraordinary downside shakeout in the USD / CAD pair right before it exploded upward in an extraordinary breakout. That shakeout probably removed about 90% of long positions right before the big move up.

This is a very frustrating situation for those who studied this trade and made significant long position commitments to it.

Why?

Because the longs were correct on the trade, but still got punished for it and likely stopped out as well. The VERY SHARP downside shakeout just before the huge upwards breakout most likely gives even experienced traders ‘deer in headlights syndrome’. It can be very discouraging if you are not prepared for it.

So I thought about how such a scenario could be successfully tackled and traded properly?

The short answer is simply one word. Patience.

If your technical studies are indicating a very good possibility of a strong breakout from a trading range or consolidation pattern then it would be good strategy to simply wait to see if such a shakeout occurs before the initial break of resistance.

Once you see what appears to be a shakeout (for example the downside move in the gold market we saw last Friday), then the prudent thing to do is to WAIT and watch for super strong demand to show up in the market quickly and swiftly. Often what this will do is either on the daily or weekly price bar create a mid range closing bar or even high range closing bar on the weekly or daily. It all depends on what time frame you are looking at.

So what you want to see is swift and strong demand coming into the market after such a swift shakeout. This demand must show up in order to give you the signal it is time to go long!

So the Gold market on Friday saw a sharp volatile down move. During the next week or two it will be necessary to see a swift and rapid price recovery with almost vertical persistence for me to believe that an ensuing ’super breakout’ is coming…

For now though, we do still see that the price is contained within a wide trading range.

Also notable (and I probably should have mentioned this first) is that the XAU mining stock index closed positive for the day on Friday! So the mining stocks did not believe the decline.

Not to confuse you any more than I already have, but the ongoing fact remains that we still DO have the monthly bearish MACD signal on the Gold Price! And we also have a bullish rallying Dollar!

Gold’s breaking either one of those horizontal green lines in the chart at the top of this page will be a BIG CLUE about the direction of gold going into the end of this year!

Peace.

Finally we are at the daily price bar chart of Gold and the most recent price action. The daily price action is of course where the real action is! You can stare at long term price bar charts all day long but they do not move that much. The daily action will now ever so slowly make the fateful decision about a gold breakout, pause or sell off reaction.

The above chart is the most current daily gold chart that is now getting almost ready to ’speak to us’. The key for gold now is to decisively break above 446 and stay above there holding new support. The performance of gold lately has been quite admirable to say the least. In light of a rallying US dollar, gold has held its own! We have also seen bullish price moves in the price of gold in other currencies, namely the Euro and South African Rand. This seems to bode well for the gold market.

James Mound over at mound trading group is sticking to his bearish stance on gold and still expects a downward crack in the gold market. Will the Fed meeting the next couple of days be the decisive catalyst? It is certainly possible. But again, it was no small feat for gold to hold its own in light of continued dollar strength. But the real question is will it still hold its own with even more upward spiking dollar strength?

446 need to be broken with gusto
It looks like the 446 resistance line will be the determining factor.

There are a number of other elements at play as well.

As I alluded to in a previous posting on here, 2005 is a yearly panic cycle for gold according to Marty Armstrong. What that means simply is that there is a decent probability of very high volatility in the gold market during the next 6 months. Not just high volatility, VERY high volatility. The yearly panic cycle in gold does not speak of direction however. Marty does indeed say the move should have a bullish bias.

The volatility argument is further supported by my previous article on the double inside quarter which I recently identified in the gold market. The double inside quarter is a big hint that high volatility is ahead for us during the next 3 months at a minimum.

So there we have already two pieces of evidence for high volatility and wide price spread. IF WE DO start to see indications of a bullish breakout, then this could indeed be the fastest price appreciation we have seen in the gold market to date. The current uptrend of the gold price since 2001 is orderly and smooth on monthly and quarterly price charts. In resembles ‘an upward ramp’ to an extent that I have seen several times before in other securities and markets. Sometimes these ‘upward ramps’ lead to buying panics and straightline vertical moves. I have seen them enough times and know their characteristic footprint.

The one wildcard or ‘fly in the ointment’ is the bearish monthly macd. Yes, a lagging indicator, but as I discussed earlier it still leaves open some bearish possibilities until it is invalidated. It will likely be invalidated by a daily price break above 446 and price holding above that level for July and August.

Surely there is plenty of potential for some real fireworks in the gold market during the next 3 and 6 month period!

Stay tuned!

Thomas

We are almost right into mid year. So that means 2 more quarters of price action for the gold market. Two more decisive price quarters. I have discovered a very important fact about the quarterly gold price chart. This is yet another clue in the quest to determine where gold will go next.

The Quarterly Gold Price Chart reveals a double inside quarter

Double Inside days are quite rare. A double inside day is when you have two consecutive price bars where the high of the price bar is lower than the previous bars high, AND the low of the price bar is higher than the previous price bars low. They are a little bit like symmetrical triangles but perhaps more powerful. They are especially rare on the longer term time frame charts. And so here we have the quarterly price bar chart of gold and we see that as we end June or the second quarter, we have a double inside quarter. This is clearly marked by the blue price bar as you can see in the chart above. This is only the second double inside quarter on a quarterly price basis going all the way back to 1970.

The first double inside quarter in 2001 vindicated itself and did show thereafter a big price move. The double inside day often leads to high volatility, but does not predict in what direction the volatility will manifest itself. So other clues are needed to help determine likely price direction. But the fact that we have a double inside quarter, a bullish yearly macd crossover as I alluded to in the previous posting, and we are currently hugging the long term resistance line leads me to believe this double inside quarter will have a bullish outcome.

The next posting will cover the most current shorter term price action on gold. If you have read the previous postings, you will have a pretty good long term perspective on the gold market.

But can anything be concluded about the near term?

Thomas.

The chart I am about to show you is what I consider to be the most important price chart out of all stock, commodity or currency charts on all exchanges! I consider it to be very important because it will and can have vast implications for so many other markets and eventually elements of the very society we live in.

The yearly price bar gold chart to the left is quite simple but very powerful. What you are looking at are all the closing yearly prices for the gold market from 1970 to the present date of this posting. The indicator on the top of the chart is the MACD plotted against those yearly prices. Anytime the daily, weekly, monthly, quarterly or yearly MACD crosses to the upside, it indicates a possible bullish price situation. The longer the time frame the greater the forward implications to price. Yearly price charts plotted against MACD are EXTREMELY long term and have profound implications for any type of market. They show massive sea changing trend changes in asset classes. What you can clearly see from this chart is that we have a very bullish crossover on the yearly MACD on yearly gold. In my experience judging macd breakouts, usually the crux of the upward price move on a bullish crossover occurs VERY EARLY and very near to where the first bullish crossover occurs ( the darker red line crosses the dotted line). There is a lot of other interpretation of MACD that I will not do here, but it is also important to mention that the indicator has a very large psychological element. While the plain looking chart to the left may seem somewhat ‘dry’, behind the scenes it depicts a massive long term battle between the power of bulls versus bears in the gold market. And it decisively shows the bulls now have the upper hand, the momentum and the likely power to break through long not seen resistance levels.

This chart gives credence to the possiblity that gold on a nearer term basis will be successful in breaking the old 52 week high near 460 area.

This chart also tells us a clue that even if gold does some extended correcting for the remainder of 2005, the power of the upward momentum is so strong and so long term, that any selling pressure will with high probability be met with renewed and more powerful buying.

This is the most important price chart for 2005!

Thomas

Another look at the yearly price bar chart of gold shows us that gold has been in a massive long term channel. This piece of information is very important because it shows us what needs to be accomplished for gold to really set itself ‘free’.

This is really a great long term gold chart. It is a yearly price bar chart of gold that in one glance gives you a pretty good perspective on the old bull market and where we stand right now. The first statement that needs to be made about this long term gold price chart is that we can clearly see that we are still constricted within a very long term trading range. The aggressive move upwards of the last 3 or 4 years in gold was a swing reaction upwards from the lower slanting support line. Despite all the excitement over gold, the fact remains that gold is still within this long term trading range and has not yet even broken through it. This tells me that the real bull market in gold has not yet even begun! A very surprising observation.

Look carefully at the top slightly down slanted blue line. This resistance line has now been touched (or attacked if you will) for the 3rd time. It is somewhat common for resistance levels to be broken on the 3rd try. As you can see from the most recent yearly gold price bar, it has held up quite well relative to the last attack on this resistence line in the mid 1980’s. Right after the attack of resistence in the mid 1980’s, the yearly price bar slammed down violently showing excess supply in the market. So far this year (half way into the year) price has not had such a violent downwards reaction. It has held and stayed above 420 which is also an intermediate support level. The longer the price bar hugs right under the long term resistence line, the greater the case can be made that we are probably in for a huge upwards breakout.

Keep in mind however that there are still 6 months left in this year. The last 6 months of this year will determine the closing price of that yearly price bar. Either the price bar will stay just the way it is with a small range, or it will reverse downward very quickly similar to the mid 80’s, or it will continue higher breaking through the long term resistence line creating the ultimate gold breakout.

IF the gold market is going to chose the 3rd option (the upwards breakout into the end of this year) then in order for the breakout to be valid, it will be necessary for the price range to be very long. A long price bar will be needed to validate the breakout if it occurs.

In my next post, I will put up what I consider to be probably the most important price chart for the year 2005.

Thomas

n mid 1970 there was a pause in the overall gold bull market. The pause and intermediate trend change lasted about 2 to 3 years and was about a 62% retracement from where the entire run started in the very early 70’s. For a long time now as we have witnessed the current gold bull run upwards, I have always kept in the back of my mind this intermediate trend change that occured in the 70’s.

I felt that it would be critical to be able to identify when this intermediate trend change occurs in our current gold bull run. As I mentioned in my previous post, the 1970 gold bull versus the 2001 gold bull, the current gold bull run in terms of time is very close in age to the first major leg that was seen in the first half of the 1970’s. It is very close in age, but nowhere near close in terms of percent gain. In fact I would describe the current gold bull run as seriously lacking in horsepower and price performance relative to the early 1970’s.

But is it really fair to make an apples to apples comparison between the two time frames and periods of history??? The short answer is probably not. Two bull markets do not have to be the same, and if they were would probably make things too easy for everyone. The rule of alternation suggests that this gold bull be different in every way from the first.

The chart above clearly shows the intermediate term trend change I was alluding to above. You can clearly see the bearish monthly MACD crossover and the 61.8% retracement of the entire major first upleg since the very early 1970’s. I will be the first to admit that the MACD, even on the monthly time frame is and can be a lagging indicator. However, whenever I see a first or second bearish or bullish crossover in the montly MACD I always tend to err on the side of caution and skepticism for the sake of risk aversion and capital preservation. I do not follow monthly MACD like a blind mouse chasing after cheese in a mousetrap. I always also consider several other technical indicators and of course price itself. If price trend and strength is strong enough, any time frame of MACD will simply lag that price strength. In the case of the mid 1970’s this was not the case. That signal marked a significant and major trend change in the gold market, but of course it was only a multi year pause before the final blow off rally into 1980.

The chart to the left is the monthly price bar chart of the current gold bull market. Note that my assertion that we have only seen a 23% retracement since the lows of 2001 is incorrect. There was a 50% retracement in 2003, the largest one we have seen so far. So here again we have a negative and bearish crossover on the monthly MACD, somewhat similar to what we saw in the mid 70’s. Indeed, it could even be argued that there is a degree if price pattern symmetry between the two time frames. Note that in the mid 1970’s before the gold market really cracked into the major correction there was a long period of indecision but then finally a sharp downside break. So again, we need to figure out if the current price action is suggesting a strong bullish or bearish breakdown in gold. To answer that question I am looking out for gold to successfully break into the 448-450 area with a nice wide price spread. That would put it over a minor ‘creek’ (resistance area) area, show us that price was able to break a downtrend and open up the door to further price appreciation.

I will get into the daily analysis of the gold chart in an upcoming post.

But next I would like to bring your attention to a couple more long term gold charts for even more perspective. I always try to do as much top down analysis as possible ( long term down to short term) so that I have a clear head on where the major trend is moving. We always need to know if the wind is at our back or we risk getting washed out of the markets, in this case the gold market.

Ok, onward to the next long term gold chart…

Thomas