-- Posted Thursday, 10 September 2009 | | Source: GoldSeek.com
Seasonal Story
The chart below was by The Moore Research Institute.
Seasonal Chart 9-9-2009
In terms of seasonality, gold has moved to the upside, confirming that prices are following its historical pattern. In terms of another thrust up, the most likely time according the seasonal data I use has the September 11th-15th time frame as the target. This means from the current high of 1009.7 a small price correction is to be expected.
If gold can spend a few days going sideways and have its Stochastic Study embed, I will view that as confirmation that another up leg is on the horizon.
US Dollar
In large part the move in gold is being helped along by the break in the US Dollar. Take a look at the Dollar Index Chart below. It is in a Bear Market. My experience has been that currencies as a group tend to trend the best of all futures markets. My experience has been that once trends set in they are hard to break. This summer was spent going sideways in a number of currencies. It looks like now that the European traders have returned from their vacations that new trends have set in.
Below is a Weekly Dollar Chart. It looks to me like 74.00 is the next downside target.
If the Dollar continues on its current trajectory, as I expect it will, higher gold prices are likely. Even if the last rally high in the Dollar Index of 79.01 were to be taken out, the Dollar would still not be in an uptrend.
Daily Gold Chart
Since last week’s report, the price of gold has moved sharply higher.
Now prices are correcting as the Stochastic Study is embedding. As long as Stochastics stay embedded, I will remain very bullish. Ideally the Swingline Low of 987.00 will not be taken out. However, even if it is, the fact is that prices are well over the 18-Day Moving Average of Closes, which currently has a value of 960.1. In even the most bearish scenario, the most I would expect is a test of that low.
Technical Analysis
It’s my belief that another surge in gold prices is about to take place. Seasonally speaking, mid September fits the historical time frame for the next up leg to begin. Technically speaking if Tuesday’s high of 1009.7 is taken out whatever the current reaction low is should be the low for the rest of September. This of course is technically speaking as I don’t have a crystal ball.
The longer prices go sideways on the Daily Chart, the more likely a bullish outcome. I say this because what an embedded Stochastic has developed. An embedded Stochastic implies internal strength. It takes place as a chart switches from being overbought or oversold to “a stronger phase”, catching those who think the market has exhausted itself…often wrong.
The most recent low in terms of the Swingline Study, the study shown above as the yellow line is 987.0. Ideally this number should not be broken as it keeps intact the bullish chart pattern of “higher highs and higher lows”.
It is common for prices to stall out at “key” numbers. $1000 an ounce in gold qualifies as a “key” number, as there is something magical about saying gold is $1000 an ounce. Once that “magic” is lost and prices become used to trading near $1000 an ounce, prices should find it easier to advance again.
Couple a weak Dollar and expectations for an economic recovery, that is eventually expected to produce inflation and the Bulls have the fundamentals in place to take prices even higher. The question seems when, not if.
Trade Recommendations
Those that follow my Twice Daily Updates, which are included in the Futures Trading Kit below, know that via my update, readers are long December Gold near 948 and are long the December Gold 1000-1025 Call Spread.
Both have done very well.
In Wednesday morning’s update, I recommended buying gold again against the 991 price level.
Stop will be issued in my Twice Daily Update as well as profit objectives.
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Disclaimer: This publication is strictly the opinion of its writer and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is taken from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures and Options on Futures trading involve risk. In no event should the content of this market letter be construed as an express or implied promise, guarantee or implication by or from The Ira Epstein Division of The Linn Group, Inc or The Linn Group, Inc. that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication of future performance.
-- Posted Thursday, 10 September 2009 | Digg This Article
| Source: GoldSeek.com
