Subscribe for 12 months with recurring billing - $199

Buy 12 months of subscription time - $199


Search Gold Prices
Gold Price
[Most Recent Quotes from]
Our RSS Feed

Gold Updates by Mail

Enter your email address:

Follow Us on Twitter
« Canadian Gold Juniors Soar – Should You Buy Now? | Main | Busy Times for OPTIONTRADER! »

Gold Prices in Uncharted Territory

With gold trading at over $1225 per ounce recently, we have witnessed a terrific rise in the yellow metal, taking it to new all time highs. For those of us who are long gold, new all time highs are obviously great news, but this situation also brings with it new challenges in terms of technical analysis.

Gold Prices in Uncharted Territory 1

With these all time highs, gold is in uncharted territory and therefore conducting technical analysis becomes more challenging. Where are the resistance levels? Where are the supports? These questions become harder to answer when gold is trading at levels never seen before.

We believe the breakout in gold came when it broke through $1033, a level that it a reached a couple of times previously but failed to break through. Therefore we believe the strongest support is now at this level and it is for this reason we do not think $1000 gold will be seen again for a very long time.

However we do not see gold correcting back to this level, as we have noted on the chart above that gold will get some support at $1150, and more at $1100. One of the reasons that we do not think gold will retreat back to $1033 is the similarity between the pattern seen now with gold breaking $1000, and that seen when gold broke $700 and ran to $1000. We class both these moves as Major Rallies and this is where the real money is made during a gold bull market.

Gold Prices in Uncharted Territory 2

A key feature of Major Rallies is that gold does not correct as many would expect, nor behave as standard technical analysis would suggest. Note that during the Major Rally of Sep-07 to March-08, the Relative Strength Index for gold did not drop much further than 50, and did not correct when it entered the overbought zone above 70. We think this will also be a characteristic of this major rally, with gold rising to over 80 on the RSI as it pushed past $1200, and it will probably not fall further than 50 this time around too.

Therefore we would be strong buyers of gold when the RSI is around 50. At present the RSI is at 56.38, so we may just watch gold for the moment, as it could dip further. In particular we are watching the USD index, which has been in a down channel for some time, it case it breaks out of its channel.

US Dollar Chart 061209

Although we view a rally in the USD as unlikely, we are watching to see if the greenback does break out as this would cause a decent correction in gold prices. However we are reasonably confident it won't, as the RSI for the USD is now above 50 and at a level that it has struggled to move higher than over the past year.

So overall we see the USD remaining in its down channel, and gold resuming its path higher, albeit with some possible consolidation this week. Further weakness in gold should be seen as an excellent buying opportunity, particularly if the prices drifts towards $1100 and the USD refrains from making a breakout upwards.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are new to this site and are interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

PrintView Printer Friendly Version

EmailEmail Article to Friend

Reader Comments (1)

Dear Bob,

Gold at this level is NOT in unchartered territory. You have to take into account the diminished dollar and then go back to 1979 and you will find that the price of $2,000+ will be about the same level as $800/oz. At least that is what Bob Hoye, Robert Prechter, and Roger Wiegand, and Jay Taylor are looking at. I have heard that from about another dozen old geezers like myself, that were there when it hit the 1979-80 prices levels of $800/oz.
Bob Meyer (geezer)
p.s. Bob Hoye even predicates the start of the gold bull really began in 2007, and believes it has legs for the next 20 years.

December 14, 2009 | Unregistered CommenterBob Meyer

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
Some HTML allowed: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>