Rising stocks and a sharp fall on spot gold reflect uncertainty as to whether Ben Bernanke will announce further quantitative easing by the Fed, at Jackson Hole, Wyo. on Friday. Further purchases of Treasurys by the Fed would lift inflation and send investors scrambling for inflation-hedges like gold and blue-chip stocks. Stocks are rising, but gold is falling. Could it be that promise of an end to the conflict in Libya makes the world a safer place — or that a resulting fall in oil prices would reduce inflationary pressures? Brent crude and the CRB Commodities Index are both rising, suggesting that the precious metals blow-off is driven by profit-taking — after the sharp surge over the last few weeks and ahead of an uncertain announcement on Friday.
Spot gold is testing its secondary [green] rising trendline at $1700/$1720. Support is likely to hold — especially if there is any hint of QE3 on Friday — but failure would warn of a fall to the long-term trendline around $1500/ounce.
* Target calculation: 1900 + ( 1900 – 1700 ) = 2100
The monthly gold chart shows spot gold testing the upper trend channel of the long-term bull-trend. Correction to the lower channel would result in a substantial fall. A lot depends on what happens Friday.
As I commented a week ago,I stated that gold had gone parabolic and was likely to have a rest and retreat to the support level of 1500 to 1600,and at that time I was in the 85% certainty,however the day after,Hugo Chavez from venezuala stated that he wanted physical delivery of his countries gold holdings from the European sector,notably the BOE,hence an outside influence destabalizes a chart pattern,hence 50% of chart patterns fail due to left field events… this gave further impetus to a point of exhaustion,but not for long…shortly after the margin requiremnets for the gold futures traders were increased,as they were with silver ( and establisment short positions being protected) a month or so ago…and this caused the blow off,which was due. A simple fibonacci retracement of a third would take gold to around the $1350… hard to say if this occurs,but the sellers are nigh and could eventuate… gold is definately in a retracement path… it is possible gold could break consolidation support level of 1550 and drop to 1350…of course a 50% retracement level takes it back to 950,unthinkable but possible….and from there to reignite the bullish long term trend… so three support levels 1550 …1350..and 950…a very interesting time for gold,mid to long term ( 2 to 4 years) gold is still bullish in my view…it’s just that the easy gains are had,now the hard gains and the hard pain begins,regards.
I need to correct my long term 50% retracement,which should be around 1100 as I forgot to subtract the base…Which is just above the long term support of $1,000,one feels if gold did correct to 1100 it would surely test 1000 and quite likely false break to 950 before rebounding above 1000 and creating a new base of 1000 for a long term bull continuation. Gold has not had a real shakeout correction,and is overdue for a big move down,which will of course be called the ‘Bubble pop’. The gold chart of the last decade has been the perfect chart until the recent froth,and how long do charts remain perfect.If you invert the recent parabolic move,you have a downside move from the means to a point of around a 30 to 40% long term correction,which also gives us a sub 1500 gold price…which would mirror the recent correction silver had from 50 to 33 … some lower highs and lower lows coming up…the long term fundamentals are still in place for gold’s bull run,contracting global economy and fiat printing presses at full tilt,causing a lopsided inflation problem…it depends on Bernanke’s speech,at the moment many realise that the problem is not liquidity but debt…if anything there is too much liquidity in the system,hence gold at 1900 and the DOW at 11000…they both need to be sedated for a spell,and that is what the gold and equity markets require right now,a sedate Bernanke,if ever BB needed to show restraint it is now…regards,Justin Towner.
Profit taking causing the fall in gold?? Weren’t gold margins raised like they were for silver in April. Might explain most of the fall.
I do agree gold looks parabolic but if you factor the falling global currencies, and “real” inflation rates closer to 10% (shadowstats etc), gold starts to look like it is on a steady stoll up. That said, I agree, the chart still looks like it’s due for a pullback.
You may have missed the follow up.