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August 13, 2006

Gold Market Update
by Clive Maund

In the last update the view was expressed that gold had entered a trading range situation, and it was pointed out that this range may take the form of a Symmetrical Triangle, and provisional boundaries of this prospective triangle were delineated on a 6-month gold chart. Since that time gold has rallied, following the appearance of a bullish "hammer" candlestick just above an important support level, but the rally died at our upper triangle boundary and over the past couple of trading sessions gold has gone into retreat again.

We can see these developments on the 6-month chart. On this chart gold now looks set to retreat to our prospective lower triangle boundary. This boundary has risen over the past several weeks so that it now more or less coincides with the support level that generated the last rally, which is at and a little below $600. We are thus looking at a probable near-term decline of about $30. An important point to note is that although the triangle is rapidly closing up, and must thus force a breakout before too much longer, this won't necessarily end the trading range situation, as the triangle could simply morph into a Rectangle, with horizontal support and resistance boundaries. The chances are good, however, that it will find support at the lower triangle boundary and rally again.

On the 5-year chart it quickly becomes clear why gold is in a trading range situation. On this chart we can see that gold rose steeply from September of last year through May of this year. After such a steep rise it is entitled to take a breather and that is just what it's doing. It is rather like someone climbing up a mountain who suddenly stops, takes off his rucksack and gobbles his egg and cress sandwiches, has a cup of tea and admires the view. It's a case of "Take it easy, man, you don't have to do it all in one go..."

Clive Maund,
CliveMaund.com

The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

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