Where the most likely low in gold is going to take place by Bill Downey

Gold Commentary

Due to the Thanksgiving Holiday in USA on Thursday, there is almost no action at all in gold. There really is no change from yesterday. Let’s take this opportunity to look at the long term channel lines of gold.

What is different from a channel line as opposed to other technical tools?
The most important factor is that the lines (for the most part) are set by the market price and not a random factor.

True a Channelist has to draw the lines but that is like a mechanic. If you have someone who knows not the guidelines for channel construction, (or vehicle diagnosis) you stand the chance of receiving irrelevant information. I think we can say it is one of the least ARBITRARY technical tools because the market (for the most part) sets the geometry for the channel lines.
If we really think about it, channel lines are nothing more than the “MOMEMTUM SLOPE” of a trend (be it down or up). The upper line being the maximum trajectory and the lower being the minimum. Another way to look at it’s like a Bollinger Band without humans picking the # of units in which to set the measurement.

All channel lines are subject to short, intermediate, medium and long term qualifiers. The chart below is the long term channel lines for gold. On this chart there are three channels (Black, Blue and Red). The red channel line is the longest and as it stands to reason, the mildest uptrend slope. The upper red channel measures where the 2008 crash occurred and the point where the “breakout” to the upside occurred. Look at the move once the channel’s upper red momentum line was breached….an explosion upward. Now look at where gold’s price has arrived back at. It has come back to test the original line. Notice how there are THREE lines at this level…one from each channel. That makes this area the strongest long term support point in all of gold. Let’s talk about those other lines.

The skinny black dotted line is the all-encompassing channel since gold was released from the standard. Thus it is the widest channel. There are three lines included within the upper and lower black lines as this channel has subsequent important price points within the large channel. The blue line channel has an upper line measured line that is parallel to the two lower blue trend lines and is at exactly ½ the distance from the 1980 high and the 1999 low (or 2001 if you prefer).
This blue channel is the current momentum since the new bull began at the turn of the century. That first lower line used to be resistance before the breakout above 500 per ounce near 2004-2005. Note how it became support for market pullbacks after that. And not how close gold is to that long term trend line. The lowest blue line is a parallel line that is positioned under price at the 500 level. Those lower two lines are the most likely place gold is going to try and make its long term low. It’s in the vicinity of around 850-1100. While it’s not impossible for the low to already be in place, odds still favor we go touch those three intersecting channel lines and make our long term low there. Odds favor that area to be the most likely place we see the lows. We can’t rule out the lowest black channel line, but the odds are the lowest for that area to be reached. The key is the three line intersection must hold on a quarterly basis of gold’s closing price. That is where the upper line of the long term red channel and the lower line of the blue channel reside. That is where the greatest support for gold will be seen if prices are deemed to fall further.

A failure below those lines on a quarterly price closing basis would then allow for the lower line to be reached. Otherwise, gold is approaching its final low price points and just missed by a hair of the TRIPLE CHANNEL LINE INTERSECTION during its last low. Thus for now, we favor one final low in gold before the bull resumes.

But it is possible that it got close enough at the 1130 low?

Yes, it is possible. But odds favor one more drop.

There are no absolutes in markets, only odds.

A monthly/quarterly close above 1272-1322 would put a lot of heat on the upside and would favor 1400-1500. Thus the bottom line is the long term gold bull market is still intact and the most likely support is just under the market price we saw at the lows. The time may not quite be ready for gold just yet, but when the real loss of confidence in government and the system reach their “point of recognition,” odds heavily favor that gold is going much higher in price. It favors a return in the coming future to the upper blue channel line and perhaps more.

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