-- Posted Monday, 30 November 2009 | | Source: GoldSeek.com
By: Dr. Christian Normann, Chief Strategist, Normann Financial
Gold reached our stated short-term target near $1200, and we closed our gold and silver futures trading positions at gold $1190 and silver $18.83 (FYI, we usually close trading positions at least 1 percent before the ideal target, as ideal targets routinely get over or undershot by a percent or more). Gold, silver, platinum, and palladium will likely have a short term correction - probably about 6 to 10 percent for gold (for some reason about 9 percent is common).
We are looking to re-enter our long gold, silver and GDXJ (Junior Gold Miners ETF) trading positions when gold trades closer to its 10 week (50 day) moving average (currently around $1075 and rising about $3 per day). Gold could go higher before such a short-term correction, but the odds absolutely did not favor maintaining our long trading position with gold stretched about as far above its 10 week moving average as it normally ever gets (see the second chart in this article for an additional reason why we expect a short-term correction in gold). Of course, we did not sell our long-term gold investment position held since early 2003.
The long-term view of gold is that it broke out of a 19 month long base when it had a weekly close at $1048. Gold is thus expected to have major support between the two red lines at $1033.90 and $978. It would take a weekly close below $970 - which we do not expect - to indicate a failed breakout and possible end to the major bull market in force since the 1999/2001 lows.
We expect gold to trade above $1400 by some time in the spring of 2010.
Gold Tests Record High Measured in Non-U.S. Currencies
The chart below shows the gold price divided by the US Dollar Index Bearish Fund. In effect, it shows how gold is moving when measured in the currencies the US Dollar Index consists of. The index is a weighted geometric mean of the dollar's value compared with:
Euro (EUR), 57.6% weight
Japanese yen (JPY), 13.6% weight
Pound sterling (GBP), 11.9% weight
Canadian dollar (CAD), 9.1% weight
Swedish krona (SEK), 4.2% weight
Swiss franc (CHF) 3.6% weight
Four weeks ago, we stated that "gold in non-U.S. currencies appears to be done correcting after the breakout," and that indeed was the case as gold rose up to test the record high near 41 as expected. We also stated that gold appeared to be starting a significant move against paper currencies in general, not just the U.S. Dollar. That move accelerated, and has brought gold to the next likely hurdle - the February 2009 high.
Gold may require two or more attempts to break that high (a significant high is usually not successfully broken on the first attempt), and we would not be surprised to see a pullback to around 38 +/- 1 before a solid break of 41. We do not consider this week's close slightly above 41 as sufficient to count as a break, especially as gold priced in Euros closed slightly below the February high.
Have a very good week in the markets.
Always remember that proper risk management is essential.
All the best,
Christian Normann
dr.normann@post.harvard.edu
www.normannfinancial.com
For the complete version of our weekly analysis including many additional and significantly larger charts (as well as potential setups in commodities, currencies, stocks and ETFs) please click here
Dr. Normann is a graduate of both Harvard University and Florida Atlantic University, with one of his degrees in Finance (summa cum laude and 4.0 GPA).
Previously, he was a financial advisor with Morgan Stanley Dean Witter, but left ten years ago because he wanted the freedom to do completely independent research and focus on perfecting his own trading style and investment skills.
He first entered the financial markets in 1995, trading currencies for his own and his family's accounts. Later, he expanded into equity, commodity, futures, and bond investment and trading, and has extensively studied the history of financial markets going back to their origin centuries ago (covering multiple extraordinary mania periods and subsequent busts).
Please visit the About Normann Financial page for important information about risk management and position sizing. We provide analysis in good faith and to the best of our ability, but all information on the Normann Financial website is provided solely for educational purposes and does not constitute investment advice. Learning to operate successfully in the financial markets is not easy - it takes a substantial amount of time, effort, and discipline. Your trading and investment decisions are exclusively your own responsibility. Proper risk management is crucial.
-- Posted Monday, 30 November 2009 | Digg This Article
| Source: GoldSeek.com
