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

I needed to write this post just as a way to consolidate all of my thoughts about the gold market.

I have plenty of charts and and specific things to say about those charts, but first I wanted to write about where we have been in the gold market so far and up to this point for the sake of perspective.

If you are completely new to the gold market then the next few lines of text are particularly important because they provide the important context of where we have been. ‘Where we have been’ is a very important piece of information for technical analysis because it provides data useful in predicting ‘where we are likely to go’.

Gold has been in a severe bear market for the 20 year period that begins in 1981 and ends in 2001.

This is simply a fact and you can verify it for yourself simply by looking at price charts of many popular commodity websites.

But why is this fact important? It is important because it helps to provide long term historical context about where we have been. It shows us that for a very long period of time gold had overall more selling pressure than buying pressure. It was a long painful cycle for many investors and traders because each rally, whether short or intermediate term within that period was never really sustainable and eventually sold off and hit new lows…

But the good news is that new bull markets are born out of previously painful bear markets. The new bull market in gold started in the year 2001 at the price of 257.00 .

Since that time and as of the date of this post, it has appreciated to 441.70 for a total of 71.86 percent. The 52 week high was 458.70 seen on December 2nd 2004. So the total percent gain from the lowest low to the highest high (the 52 week high) is 78.21 percent.

This 78.21 percent gain from the lows of 2001 represents bull market action. The tape action has been consistent in terms of trend strength and upside persistence.

For a little more perspective, consider that the first major leg of the gold bull run in the early 1970’s gained 442 percent. During this major first leg of that bull run the most retracement that was seen was 38 percent.

The first leg of the 1970’s bull lasted about 5 full years. That was 5 full years of strong uptrending price action. The current bull run in gold has so far given us about 4 and 1/4 years of uptrending price action.

There should be no reason for the gold run of the early 2000’s to be exactly the same as the first leg of the gold bull run in the 70’s. But the comparison is still interesting. Our current bull run, almost 5 years long has only returned 78.21 percent, whereas the 70’s first leg bull run returned 442% within a 5 year time span.

So, what does this mean for the current bull run in gold?!

A. It could mean that the current gold bull is and will be much weaker than the 1970’s gold bull in terms of price acceleration per unit of time and total percentage gain.

B. OR, it could mean that the most explosive leg of the current 2000’s gold bull run is immediately and very soon ahead of us to complete the first major bull leg!!

Option A or B is what I will continually attempt to analyze here at the Gold and Silver Trading Forum!

Thomas

During July 2004 I drew up a long term price bar chart of the gold market and I will post it here so that you too can get some good perspective on the gold market. Soon enough I will post an updated version of the chart for 2005, but for now the gold chart still helps me get my original main points across.

Here is the chart:

The 70’s Gold Bull Run
Take a look at the first part of the chart on the left side. That was the historic 1970’s bull run in gold. By the way this price chart shows YEARLY price bars in semi log scale to help keep all price percentage changes consistent regardless of price level.

The fact that this is a yearly price bar chart should be mentioned again just so you do not forget what it really means. For starters, it means we are dealing with the super long term. It also means that the details of each price bar and how it closes for the year is very important for future price prediction.

Anyhow, back to the chart.

Looking at the early 1970’s ( all the way on the bottom left of the chart, it should read ‘1970′ instead of ‘1960′) at the very beginning of the gold bull run, you can see that there was a mid-range yearly close. This type of price bar probability wise often marks some sort of turning point and directional trend change from the previously existing one.

I tend to think of this mid-range close as the real start of the bull run of the 1970’s. In price percentage terms after this mid-range close we saw a total of 4 very strong yearly price bar closes that marked the first major leg of the 70’s bull run. The percentage gains for years 1, 2, 3 and 4 were 16.5 %, 49%, 75.6% and 62% respectively.

Note that the 3rd year, the one with 75.6% gain was the best year out of all of them during the first major part of this golden bull. That was a truly powerful price move and the most ripe part of that bull run.

The 2000’s gold bull run
But what about the gold bull run of the 2000’s?

You will notice that in 2001 there exists also a mid-range yearly close. This is where the current gold bull run started. So far, years 1,2, and 3 have returned 25%, 19.5 % and 5.3% respectively. The most recent yearly price bar on this chart was drawn half way through 2004 and does not represent the close of the year 2004. The yearly close of 2004 showed us a 5.3% total gain from the previous year’s close.

The clear conclusion that I can come to right now on the basis of this comparison is that the current gold bull run compared to the 70’s gold bull run is that the current run is much slower and weaker strictly on a percentage return basis.

In other words, if the current gold bull run is in anyway going to start resembling the gold bull run of the 70’s, then it needs to start accelerating rapidly and soon with powerful price persistence and momentum.

But is there any evidence to suggest that such a powerful persistent move could be possible?

I believe there are several clues which suggest this persistent powerful move (possible on the order of 50% to 70%) could happen starting from the 3rd quarter of 2005 and running right into the end of the year. In other words, the explosive move could be set to occur over the next 6-7 months).

One of the possible clues has to do with a prediction Marty Armstrong of Princeton Economics International made in 1999. Specifically he wrote:

“In the past, every 8-year cycle in gold has produced an important low and the next target still remains 2000. A low under $252.50 next year will qualify for such an 8-year cycle event that should then be followed by a true bull market into 2007 peaking with the next Economic Confidence Model turning point. Given the fact that we have a Panic Cycle Year in 2005 and the underlying strength of our long-term momentum indicators, it would certainly appear that gold should exceed its 1980 high going into 2007.”

I will tell you more about Marty Armstrong and his cycle model in a future post over at the Stock and Commodity Trading Forum. But for now, just believe me when I tell you that this man was genious enough to come up with one of the most powerful cycle models ever that has stood the test of time.

In the quote above, Marty has said that his model shows a panic cycle in gold for the year 2005. The term panic cycle in Marty’s trading model means very high volatility and price spread, but it does not refer to which direction price movement will be. Other analysis is needed to determine likely price direction. I will do that analysis in future posts right here at the Gold and Silver Forum. It is very significant however that Marty’s model has shown 2005 to be a yearly panic cycle for gold. Not a daily, weekly, or monthly panic cycle, but a yearly one! I made this point earlier but will repeat it again. Longer time frame price bars and indicators have greater and more meaningful predictive implactions for immediate future price action.

By the way a 70% run in gold from here would put us pretty close to the old high of 800 per ounce price of gold.

I suspect that if this run gets started during the last half of this year that it will slice through the 500 resistence price level like a knife through butter.

The 400 level price resistance area was a very thick and difficult resistance (supply) area for the gold market to overcome. So far its behaviour and price action through this well defended area has been absolutely superb!

If we were still in a gold bear market, then this resistance area would have slammed gold down on its face and pushed us well under the 370 area in a violent correction. But it did not happen!

During 2004 you can see that the 2004 yearly price bar did an intra-yearly test of the support area that marks the bottom of the long trading range during the mid 1990’s.

More clues and analysis in future posts…

Including a look at recent price action and what further evidence exists to help us determine where this gold bull is going to run next…

Thomas