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Gold is on the rise after months of
sluggishness.
After all, it’s been almost a year
since the $1900+ record high was reached, yet the gold price hasn’t declined
even 20%. Think about it... considering the 170% gold rise (from the 2008 low
to the year ago record peak), gold has only given back 19+%.
Gold’s strength reinforces the
reality of an unbalanced financial world.
Accumulation time is drawing to a close,
but it’s still not too late to buy new positions.
Gold will now look promising by staying
above $1630, but it’ll be clearly out of the woods above its 65-week
moving average at $1650. How high could gold go?
GOLD TIMING: Bottom in
& poised to rise further
Many of you know the ins and outs of our
favorite intermediate indicator. But for the benefit of new readers and to
refresh the main points with older readers, we’d like to review it.
This is pretty technical. But if you
follow along we think you’ll agree that this indicator helps measure
the timing and growth potential for each intermediate gold rise, as well as
the declines. It’s worked well over the years, including during the
bull market of the 1970s.
Bear markets also have these
intermediate moves, but with subtle differences.
Gold is a cyclical market and its moves
tell us a lot about the world and other markets. Right now, it’s
telling us the 11 year bull market is alive and well.
This leading indicator is shown on the
following Chart Overall, gold has intermediate moves we call the A
through D pattern. The As and Cs identify the gold
rises, and the Bs and Ds identify gold’s
declines.
 During a bull
market, the C rises tend to be the best leg up in the bull market when gold
shoots up to a record high. In fact, this reinforces the strength in the bull
market because if record highs are not reached, it would raise a red flag.
The A rises are normally moderate. But
if an A rise reaches a record high, then it’s reinforcing an
exceptionally strong bull market. B declines also tend to be moderate, and
together with the A rises, you could say it’s a consolidation time...
preparing for the next strong C rise.
The wild moves tend to be the C rises
and the D declines. D declines are the sharpest when gold corrects the most.
D declines usually fall to test the
65-week moving average during a bull market. It wasn’t until 2008 that
gold’s D decline broke clearly below this moving average for the first
time in the current bull market.
The intensity of the crisis took hold,
but it didn’t take long for gold to jump back up. And we don’t
think it’s a coincidence that gold then went on to have the longest and
best C rise in the bull market!
Gold rose almost 120% from April 09 to
September 11... a C rise twice as strong and twice
as long as all of the C rises since 2001.
This rise has essentially coincided with
the ongoing unprecedented problems we have in the world.
The best C rise before that was in
2005-06 when gold shot up almost 58%, followed by the 2007-08 rise of nearly
56%.
SO WHERE ARE WE NOW?
Here’s a twist and some food for
thought... Gold fell from its September record high almost a year ago and it
declined nearly 20% to its December low. This fall alone could’ve been
a D decline because the indicator fell to the low area and gold tested its
moving average. The percentage decline was also in line with former D
declines.
Then the 16% rise to the February high
was within reason for an A rise, while the 14% decline from the February
highs to the recent May lows was also normal for a B decline.
If this proves to be the case, and the B
low is complete, then gold is getting ready to take off in another C rise.
And if the bull market stays true to form, we’ll see a record high
reached before the leg up is over!
Once gold closes and stays above $1650,
we could see it jump up to the $1700 level. Above $1700 means $1800 would be
the next target.
If gold rises in a C rise, similar to
the 2006-2008 C rise, gold could then reach record
highs near the $2200 - $2400 level.
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