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January 20, 2007

Gold Will Explode Higher in 2007
by Robert McHugh

Gold is finishing a base-building consolidation pattern, a Symmetrical Triangle, that is close to completion. Gold should breakout higher in early 2007, with $900 an upside target, perhaps by year end. The thing about Symmetrical Triangle patterns is, the direction that prices were headed going into the pattern will be the same direction when prices leave the triangle pattern -- in this case up.

Gold finished the Minor degree wave 3 of Intermediate degree 1 up on May 12th at $730.40.

Gold's Minor degree wave 4 Symmetrical Triangle, which is a consolidation pattern of the Minor degree wave 3 rally that started back in 2001 and extended into the May 12th, 2006 top, is almost complete. Waves a through d within wave 4 are complete, with e down underway, possibly taking Gold down to the 600ish area. Waves a down and b up of e down are complete, with a final wave c of e down next. It is possible that wave e down is complete. If so, we will expect a breakout of Gold decisively above 640. If we get that, wave 5 up has started and we will add Gold to our conservative investment portfolio. Wave fives typically extend with precious metals, so for wave 5, $900 is not out of the realm of possibility for Gold.

An alternate scenario (with diminishing probability) is that Gold may morph into a 3-3-5 Flat, meaning wave c down of 4 would drop toward 525ish or lower. If it drops much farther, then the alternate labeling shown above is likely occurring, a one degree larger correction, Intermediate 2 down. But if that alternate is occurring, wave 2 down would be on its last leg, wave c down. A rise above the May 2006 $730.40 would eliminate the alternate labeling. If this alternate is occurring, we will consider it a wonderful buying opportunity. However, we do not think it is occurring.

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"And when you were dead in your transgressions
and the uncircumcision of your flesh, He made you alive
together with Him, having forgiven us all our transgressions,
having canceled out the certificate of debt consisting
of decrees against us and which was hostile to us;
and He has taken it out of the way, having nailed it to the cross."
Colossians 2:13, 14

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Robert D. McHugh, Jr. Ph.D.
Main Line Investors, Inc.

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at www.technicalindicatorindex.com. The statements, opinions and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided.