-- Posted Tuesday, 19 July 2011 | | Disqus
In general, gold market overview appears mixed according to PM Investors and it is obvious. Some say gold has miles to travel, other suggest gold may take a pause before next journey and some others say it’s time for gold to fall. Debates continue in blogosphere. Recently, one of our Subscribers has sent us a link to an online article about gold being ready to drop to $1,320. This article claims there will be a decline in the price of precious metals in the second half of 2011 and that the proliferation of gold ETFs will make the drop especially violent.
The author argues that the recovery will be a long, hard slog over the coming years, rather than runaway growth and inflation or catastrophic collapse. With neither the bulls' nor bears' extreme scenarios proving accurate, the logic behind owning gold seems suspect. The author concludes that barring a sudden dramatic shift in economic circumstances, such as a strong oil spike or major sovereign default, we favor a drop in gold prices over the coming six months. In looking at the prevalence of investors and the ease of use of gold ETF's, we also expect that any significant sell-off will be particularly strong and violent. We expect to see spot gold trading below $1320 by the end of the year.
Summing up, the author’s three major bearish factors for gold are that the recovery will be a long hard slog, rising interest rates and the rallying of the USD index.
We would like to share our thoughts on this topic to our readers.
gold & silver miners commentary
our SP Gold Bottom Indicator, flashed a buy signal on June 29th while at the same time we were short-term bearish on the market (it turned out that we should have followed it).
Keeping this in mind, let’s have a look at current gold market moves (charts courtesy by http://stockcharts.com).
In very long-term chart for gold, we see a third attempt to move above the long-term rising trend channel. In late 2010, a similar attempt was unsuccessful and was followed by a significant decline. Certainly this could be the case this time as well. Naturally, we could see a true breakout, however so far it has not been confirmed yet, so we remain skeptical.
The current momentum, which gold has shown at the first sight seems to make the breakout theory quite probable (rallying on strong volume is bullish phenomenon), however, even gold is to rally strongly from here, a correction will likely be seen before additional significant upward movement starts. Please note that there is a strong resistance level created by extrapolating previous tops and bottoms and using the Phi #1.618. This is just above $1,600.
If gold can move above this level and confirm its move, the next target would be well above current prices. This would be quite a rally from here, but such a move does not seem very likely over the next few months – at least not yet.
In the long-term GLD ETF chart, we see a very sharp rally in the share price and this caused a similar rally in the RSI. In fact, RSI levels rose in a way which was truly unprecedented as they went directly from buy levels to sell levels. It seems never to have happened this quickly before – at least not in the past few years. Early this year and also in the middle of last year, we saw quick moves up in RSI levels but both times were a slower than this one.
Two similar sets of situations with two similar patterns each are present today. This is somewhat perplexing. Two of the similar patterns point to a decline in price to the level of the 150-day moving average. On the other hand, two additional patterns point to a small correction to be followed by a continuation of the rally. The picture should become clearer in the days ahead and other signals may also give us better insight.
Summing up, it seems most likely that a small consolidation will be seen and the way it plays out will determine where gold prices go in the weeks ahead. The long-term picture is clearly bullish, but it doesn’t mean that gold can’t decline for a month or so.
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Thank you for reading. Have a great and profitable week!
P. Radomski
Editor
www.SunshineProfits.com
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All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.
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-- Posted Tuesday, 19 July 2011 | Digg This Article
| Source: GoldSeek.com
