-- Posted Tuesday, 9 February 2010 | Digg This Article
| | Source: GoldSeek.com
Rick’s Picks
Tuesday, February 9, 2009
“Phenomenally accurate forecasts”
With the correction in gold prices now entering its third month, bulls would do well to take the long view. Compared to the gut-wrenching grind to hell in 2008, the current consolidation has been a piece of cake. Since hitting a record high of $1229 in early December, the price of an ounce of gold has fallen $185, representing a decline of 15%. In comparison, the 2008 correction amounted to a full-blown collapse. Prices fell 35% over a seven-month period, from $1066 to $694. The chart below shows both corrections. We’ve also drawn in some hypothetical price bars in red to show what the chart would look like if this consolidation were to track the path of the earlier one. That would yield a bottom near $856 in early June. If that sounds like strong medicine, consider the payoff: The price of gold rose 77% from its October 2008 low. If a similar situation were to play out in 2009, gold would hit 1515 by the summer of 2011. That scenario sounds like a scenario that everyone but bullion bankers and Democrats could root for.
More immediately, the Rick’s Picks forecasts calls for further slippage down to at least 1014.20, basis the April Comex contract. That’s less than 5 percent below current levels, so it could conceivably happen by the end of this week or early next. We’d buy aggressively down there with a tight stop if the opportunity were to present itself. Since we never want to chisel these predictions in stone, we should also allow for the possibility of a bullish reversal at any time. To achieve that today, the futures would need to hit 1077.40. A bullish turn from above 1014.20 – from here, perhaps – is not exactly a longshot bet, either, since our analysis for the Dollar Index suggests it may have made a top of at least intermediate-term importance when it hit 80.68 on Friday.
65-Week Moving Average
We’d like to share an interesting note from the Rick’s Picks chat room, which you can access with a seven-day pass by clicking here. This was posted by “Emerald” on Monday, and it squares nicely with our own, patient outlook: “Regarding your query on Gold, one the most reliable metrics for evaluating it has been the 65-week moving average which has contained every decline since mid-2001 except for the sell-off in late 2008. The market peak in December stretched Gold about 1.33x its 65week MA; only May 2006 and March 2008 were more extended. Currently, the 65WMA is at 972 and rising about $5 to $6 per week. After the May 2006 peak in Gold, it took five months for Gold to consolidate back to its 65WMA. It could be that Gold needs more time to digest its gains from the fall of 2009. I am very bullish on Gold, but perhaps we get too impetuous in wanting Gold to properly reflect the economic/financial environment we are in. Gold will get there on its own time.”
***
Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2010, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Tuesday, 9 February 2010 | Digg This Article | Source: GoldSeek.com
