ChartWorks
PUBLISHED BY INSTITUTIONAL ADVISORS
January 4, 2011

Technical observations of RossClark@shaw.ca

Gold – Correction Zone Now; Bubble Later

During the past few years we have presented the chart of the 27-year base in gold (1980 through 2007) and its comparison to the multi-year consolidations and breakouts in numerous other markets over the past decades (Nikkei ‘68, Silver ’73, Sugar ’74, Gold ‘78, Dow ’83, Crude Oil ‘04, Copper ’05 and Wheat ’07). The rate of change in the current rally has not even entered the exponential phase seen in those correlated markets. The minimum target of $2155 is three times the height of the base; however this could easily become merely a level for a shakeout as seen at $425 in 1979 or the Dow at 2700 in 1987.

One of the closest correlations places it similar to gold of August 1979; a period where the US Dollar was testing a previous support, the equity markets were buoyant and gold was completing a five-week consolidation around $300. The speed of the action is roughly one half of that seen at that time. Ideally, the $2155+ target will be achieved this spring with an outside possibility that it will be delayed into the next seasonal rally coming out of August. The 34-day exponential moving average ($1383) and the 55-day Bollinger Band ($1324) are the two best supports. The moving average has been tested regularly, but a kiss of the lower band is overdue. Ideally, it will occur with RSI(14) readings below 50 in both gold and silver .

(Full article plus chartwork linked below)