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Gold: Off The Launching Pad
Back on April 30, 2009, when gold was trading at $895 per ounce, I wrote an article suggesting that gold was on the appropriate launching pad for a sustainable move. At that time, I did not clarify what direction that move would be. Honestly, I did not know. I did know that gold had been consolidating in a range (which I could quantify), and similar consolidations in gold usually led to a breakout in either direction.
In that article, I wrote the following:
"What What So
we do know is this: compressed prices can lead to explosive moves in either
direction.
we don't know is this: what direction that it will ultimately be.
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."
To my credit I did write
the following about gold on April 30: "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."
the following about gold on April 30: "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."
See figure 1, a monthly chart of a continuous gold contract. Our indicator, which measures the degree of consolidation, is shown in the lower panel. Gold prices have been compressed to a statistically significant degree for the last 8 months. It appears that September's upside resolution or "breakout" will result in higher gold prices as volatility increases and the range is broken. Gold is officially off the launching pad!!
Figure 1. Gold/ monthly
*****
Technically, the "breakout" as per my definition would be a close over two pivot high points, and this is what we have. I cannot be any clearer. See figure 2, a monthly chart of the SPDR Gold Trust (symbol: GLD). The pivot high point at 96.20 is now support. A monthly close below this level is reason to abandon the notion of higher gold prices.
Figure 2. GLD/ monthly
*****
While I normally don't predict how far prices will go, we can do a price projection for GLD based upon the chart pattern. The width of the base is about 25 GLD points; we can add this to the breakout point of 96.20 and we get a price projection of 121 on the GLD.
Lastly, I will pose the following and attempt to answer in a future commentary: Why is gold breaking out? What is the significance?
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Thanks for comments/suggestions re UK investor with £10k to invest.
re comment 89898 ie "The comment asking for advice on investing 10k in gold is the first sign of new highs bringing fresh money in to play the next great investment.
The speculative bubble has begun"
you might be right about new money coming in but I have been buying gold both on a monthly basis and with lump sums for last 5 years so it's not new for me. Comment of interest nevertheless
they are talking about the new normal on cn bullshit. so what is the new normal for unemployment? ten percent or more? hmmm. God help this country. Help them to see and to hear before it is too late, if it is not already.
the last 3 years gold has been inverse to stocks, but now both are going up? The worse the news gets the higher the market goes!
NEWSFLASH!!!
Checking finance news tonight the Dow rallies 200 points on the great news that another 500000 people have lost their jobs last month. WTF is going?
even the maths question here seems bonkers!
hmmmm, 16 minus ? = 31 WTF?
16 minus -15 = 31.
This is 5th grade mathematics.
http://secmal.blogspot.com/2009/10/call-for-600-gold.html
The comment asking for advice on investing 10k in gold is the first sign of new highs bringing fresh money in to play the next great investment.
The speculative bubble has begun.
That might be the outbreak in US$, for now with spot 1023 $ (6AM eastern/ noon CET) gold did not pass the 695.6 Euro high from 09/04.
While the chart in Euro shows a tendency to break out, it has not happened yet, the same chart in Yen looks even more range-bound.
For a real bull move gold has to move in all currencies together. A monthly chart is not that much of a timing tool, so let' wait a bit more.
Afree spot gold chart can be found here, in the settings it is possible to change time and currency. http://live.bullionvault.com/gold-price-chart.do
Gold has been tight banded float to dollar peg for years. Central banks won't even allow it to break out. They just allow it to loose band float to dollar peg tugging on it the whole way.
What happens if that leash should break, Heph? I only ask because it appears to be very old and worn.
Well the master becomes the servant and Gold gives a long terrble talk to the dollar about what it's been up to, where it's going in life, what it needs and wants out of life and then it ships it off to a horrible summer camp where it gets beat up by the other children.
They just moved the trading band up a smidgen. Hold on tight because it is going to be a long, wild ride through some scary and dark places before we can safely emerge to survey the remains of our debt-destroyed civilization.
I have £10k to invest in Gold and am UK resident.
What's the best way to buy an investment in Gold if I want to gain from any appreciation but not have that negated by a fall in the Dollar ?
Anyone help ?
Sorry.
Surest sign of a top...
By investing in gold, you have negated the effects of a falling Dollar, this will be reflected in the price of the gold. If you want to benefit further from a fall in the Dollar, you should borrow USD and buy gold, silver or with it. As you are a UK resident, you can do what I have done. I have a have bought physical gold, which is an insurance policy and I also have a short USD vs a couple of currencies (Euro, NOK), but these are really separate positions which I manage more actively.
As you are in the UK, I assume your base currency is GBP, so I wouldn't worry too much about the USD vs GBP position, they are going down together.
Goldmoney.com Jersey.
By the gram, can exchange into several currencies. London exchange pricing.
Backed by physical gold in Zurich and London. No VAT.
Also silver and platinum are available.
Disclosure: I have no association, nor do I own gold, just did some research.
I would not be surprised if it did break higher but note that the current pattern looks very similar to the previous historic peak back in the 1970s- views?
"Holy Shit"
- Bill Hicks.
$1,200- $1,300 works.
Several things go into this analysis that makes what I do repeatable and replicable:
1) quantify the period of low volatility
2) quantify what a break out is; that is, I define exactly what I am seeing in the price action
3) quantify what a failed signal is
Without any real measure to quantify what you do, you will never know if you are right or wrong.
You know the forces involved. You know the central banks wish to use the large above ground gold supply to leverage against the mining activiity to set the mined gold an achievable price point. You know the people who buy it want it to be cheap to use in industrial applications and you know whether the investors are currently being scared away from it or chasing after it.
These forces always make it underperform all other investment classes over time under good circumstances and make it outperform many investment classes under stressed circumstances. So to gauge whether the breakout is up or down. You simply have to look at all these factors. There were some breakouts to down side while stocks were cooking off huge gains. Thats the trap they are in now. To stop gold from sucking in everything like black hole they have to bring something out to compete against it. Which is why a stock market crash is a given. The danger is if they can lipstick up the pig fast enough and get her in a g-string before everybody goes to gold, because if they go to bonds and treasuries then it's good because they will come back out to equities. But if they go to gold then you won't see them for a long time becasue it's too much hassle to get in and out of gold and the paper market on it isn't trusted. So you just have to be able to analyze if an equity crash would benefit the bond and treasury market enough to keep enough people from making the dash to gold and silver.
Just by what so many people are seeing. I think it can go several equity crashes like the great depression before a final dash to gold. The only counter arguement to that is well damn. Look we had that huge run up in equities and gold still got some. You could probably forecast breakout to upside every time and be right 80 percent of the time.
Sorry to break it to you but all your graphs are nothing but tarot cards. You just can't accurately predict the future using the past as a reference point.
Anon 89562,
predicting the future is not the task.
Detecting a trend that is presently in force is the task.
Play the trend and detect when it changes.
the great yogi once said that "it's hard to predict things, especially about the future."
Faber did not mention gold in the linked article, only if you assume that dollar and gold are inversely related Faber makes a point about gold.
Andy,
after the PM fix and the impressive market action before it gold and silver are in rally mode again. Gold took out the resistance of the all-time-high in US$ and the resistance going back to April in Euro. Only in Yen is Resistance at 3000 Y/g left, the PM fix came @ 2963 Y/g. If the buyer with the deep pockets continues that resistance will be taken out soon.
you are in good company - and Dr. Faber was spot on in his call of the the March lows and subsequently the current rally - also it is interesting that the technical blogs seem to be calling for a significant selloff in the next few days, particularly with today's action - your 1080 call might just be on the money
Sheila and Mary sitting in a tree
F-D-I-C S-E-C
First came Ben, and then came Timmy
Now come the gold bugs blowing smoke up our fanny.
Looking back at all the graphs, technicalities,I noticed over the years they are nothing but tarot cards. You just can't accurately predict the future using the past as an indicator.
I would track real gold, not an ETF. It's similar chart, but tracks oddly in certain cases. Especially since it's a fractional reserve system like the FED
gold is the only currency not like lays potato chips - you can't go out and make more when the current bag runs out....
fuck the fed, fuck obama, and fuck the banksters...
We like GLL trailing buy stops above 11.75...
i love you big guy...ha ha ha
Gold is breaking out because there is systemic crisis.
Gold and Systemic Crisis!
http://www.zerohedge.com/article/gold-and-systemic-crisis