The first Presidential Debate is out of the way.

President Obama didn’t come with his “A” game. In fact, he came with no game. Politicians are like cats in that they have many lives and the President clearly used one of his nine lives up last night.

Does this mean Mitt Romney is now favored? No, but he did a good job, one that was strong enough to most likely put him seriously back in the race, especially  in the key states that will determine the next President. He needs Ohio and Florida, so polls over the next few days will give an idea as to just how well Mr. Romney did in winning over some Ohioans and Floridians. Let’s not forget Colorado either.

Gold liked Romney’s performance as it is up sharply the morning after the debate. In fact it’s knocking on the door of fresh highs for 2012. Now don’t think this is solely because of one debate, it’s not. Today Turkey moved its forces to heightened alert and will be calling on NATO members to defend Turkey’s boarder with Syria after border towns in Turkey were bombed by Syria and Turkish citizens killed. Turkey can well defend itself, so Syria is crazy to be looking to start up with Syria unless Syria wants to drag Iran into this mess. Iran is reportedly moving soldiers to its border with Turkey so Middle East problems have clearly not gone away. They are simmering and will soon boil over.

Since my last report not a lot has changed on the world scene. The ECB is prepared to aid Spain. Spain hasn’t yet asked for help, since the open markets are still buying Spanish debt in bulk and at reasonable levels and Mr. Rajoy needs a better political correct time to ask for help. Spain is able to sell debt at reasonable levels because buyers of the bonds expect Spain to ask for help from the ECB very soon, which will increase the value of the bonds.

Greece has not reached a deal with the troika on releasing the next round of financing as the troika doesn’t think the plan proposed to save billions of Euros in 2013 and 2014 is credible. In fact there were reports today that Spain, the Netherlands and Finland want to postpone the decision on releasing the next 31.5 billion euro tranche of Greek bailout aid until the Nov 12 meeting of Eurozone finance ministers.

Israel said it won’t attack Iran until the spring. Syria attacked Turkey overnight and Iran is readying its army on the Turkish border. This is gold’s environment.

Pictures do better than words at times. This is one of those times. Look at the Seasonal Chart below. I haven’t changed it in months.

Prices continue to follow the historical picture of rising prices from August, now through September and possibly into year end. There’s little doubt that at this point in time, the above pattern is at work and the fundamentals at work support it.

In my last report, written about 3-weeks ago I wrote that; ”I have been looking for the 1775-1800 range to be the first resistance point, but never expected it to be hit this early into the seasonal cycle.” Here we are only in mid September and 1775 has already been hit, with the strongest seasonal part of the year ahead. To me this means there’s room for more gains on the horizon.”

What more can be said. Prices are trading against the $1800 price level now and I see more gains ahead, but ones that have to be fought stubbornly for. Not ones off of sudden soaring drives higher.

The above Monthly Chart pattern remains in a bullish mode with each high being higher than a previous high, each low higher than a previous lows and prices staying over the 18-Month Moving Average of Closing Prices.  Only getting back under 1554.4 would at this time negate the bullish chart pattern.

I labeled the Bollinger Band Top on the above chart. Its value currently comes in at 1843.9 at this time. Given that the Slow Stochastic Study is not overbought, this seems a reasonable upside target.

Keep in mind that Monthly Charts move very slowly as each line on the above chart represents about 22-business days. In order for gold to get under 1554.4., prices would have to drop nearly $245, not an event that seems likely in the intermediate term.

The Weekly Chart is very bullish as it has an embedded Slow Stochastic reading. This can be seen on the bottom graph on the above chart. When both the “red” K-line and the “gold” D-line are going sideways over an 80-reading for several weeks in a row, I say this study is locked in…embedded. To me this means that those bullish have control of the market and that prices should be pressured to move higher.

A sign that the uptrend is going to correct would come when the red line closes under 80. I don’t see this current chart formation as being close to that occurring, so I remain bullish for that reason.

The 18-Day Moving Average of Closes, the red line running through the Weekly Chart Data, is well under the last break low of 1735.8. This means that this Moving Average is not going to provide an entry point if prices are going to continue moving higher now.

Anywhere you decide to enter, the number as I see it that you don’t want broken is 1735.8 as that would destroy the pattern of higher highs and higher lows. In fact, I am thinking that 1735.8 should not be seen again in 2012 if the bull case is going to hold through year end.

I’ve placed an image of a bottle on this chart and no, it’s not due to a drinking issue.

I often mention how Bollinger Bands widen out and narrow in. If you look at the bands and the bottle, you can see somewhat similar shaping. As the Bands narrow in, market pressure builds up behind the bottleneck. The narrower the neck gets, the powerful the move when it break out. You might say when the pressure blasts out of the neck. At that time prices move to widen the bands out and the process enters a trend stage.

Gold is in an uptrend. The red low arrows and green high arrows show that the market is making higher highs and higher lows over the 18-Day Moving Average of Closes, shown as the red line. Next upside target is the Bollinger Band Top of 1798.8.

Whether this chart pattern runs out of pressure or “blasts” out of the neck of the bottle so to speak has to do with what the Slow Stochastic Reading does. If it embeds, I expect a move towards $1850 an ounce. If not, I expect prices to trade a bit more sideways and still resolve to higher prices.

What could hurt the Daily Chart is getting under 1773, the last break low. Bears might say that if 1773 were taken out, a pullback to the Bollinger Band, currently near 1739.6 would be a downside target.

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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. Chart data is courtesy of LGP-IraCharts. 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 not indicative of future performance.

-- Posted Thursday, 4 October 2012 | Digg This Article