$1,000 Gold Coming Soon, a Technical View
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Fireworks are what we got straight out of the gate into 2008!
Traditionally, the markets start off with a few very solid sessions to lock in a few percentage points of profit in the first trading days of the year. The reason behind these 'normal' gains are that all the premiums paid to the pension funds and retirement funds find their way into the stock markets all around the globe, especially in the US and Europe.
Unfortunately for the bulls, instead of the expected rise they got a blow to the chin, with prices dropping rather heavily these first few days after still more disappointing economic news. In contrast to the major markets, precious metals went in the opposite direction, charging higher from the start with Gold even setting a new record nominal high. To us this came as no surprise. Last Month we discussed gold's strength with Resource Fortunes Premium Subscribers in "Order Over Chaos: Profit from the Big Picture!", and gold broke out as expected.
You would think that the investment community, that is the banks, brokers and other professional advisors would scratch their head and adjust their expectations to these unexpected fireworks, but they don't. Last week there were a number of experts from different brokerage firms interviewed on the daily business radio channel I listen to during the day and their comments just about blew me away. They still don't understand. Gold has entered a new era and they just refuse to see it. They either have no opinion on Gold (let alone Silver) or they just see Gold as an abnormality, a freak rise that will soon be over.
These comments confirm my view that we are still in the very early stages of this major bull market in Gold, and it will most probably take a lot of time for these gentlemen to admit that they were completely wrong. By that time, Gold will have risen quite a lot more, perhaps even soaring above the $1000 mark before these 'analysts' eat their comments and retrace their steps.
As long as the Gold market is left to the small inside crowd consisting of investors like you and I, there is still time to get in at bargain basement prices, handing you the opportunity to build a portfolio that could easily rock your world in the years to come. Seize this opportunity with both hands because when the stampede begins, and believe me that time will come, prices will rise like you have never seen before. Fortunes will be made for generations to come if you act when you should.
I wish you all good health, a lot of wisdom, and the unfurling of fortunes.
All charts are courtesy of Stockcharts.com
As mentioned in our mid-month update during December, gold was expected to break out and that was exactly what it did. The pennant in the chart showed the way, and Gold reached a new high all-time nominal high.
The big question, of course, is what's next? Generally, Gold should continue to rise, reaching for new highs, but there will always be corrections along the way. For instance, there is some negative pressure building in the chart, and negative divergence could be the setup for a correction. However, it is also possible that this negative divergence could be washed away if Gold keeps charging higher. For now it's kind of easy, just sit back and let the chart do all the work. If there's a correction, the blue support lines are the target to stop the fall with the rising MA's in between.
Silver followed the example of Gold, and also charged out of the gate in January of 2008.
Thanks to this strong performance, Silver is now above the resistance at $15, which up until now had kept the price down for almost 2 months. Silver is just a whisker away from the highs made in November, and we should prepare for a test of this level very soon.
If the bears don't want to accept defeat this early in the year, they will have to start a counterattack pretty soon. If they don't, and Silver breaches the recent highs, we could see a very rapid rise towards the $20+ level. At the beginning of last year, Silver rose from $12 to $15, 25% in 2 months. If history repeats itself and we get another 25% rise (from the $15 level), we will see $18 to $19 very soon.
The red channel has acted like a springboard and Oil is facing the $100 mark once again. While it has breached it briefly, it hasn't yet broken it definitely.
It is obvious that the bears are putting in their best efforts to try and stop the price of Oil going through the very important psychological $100 mark. If Oil should manage to take out this resistance level, we could see an extra boost because many shorts will be forced to turn tail and cover their positions, adding further fuel to this rise. The chart is still looking very strong, although a successful attack of the bears could leave some negative divergence in the RSI, potentially leading to a small correction that could take Oil back again to the red channel line.
In our prior update I mentioned that I expected to see a test of the 80 level in the USD index. The fact that the USD didn't even manage to reach the magenta channel is extra confirmation of the poor state the USD is in. Although this test could still come, the chances of it occurring are diminishing rapidly, with the USD now back down below both MA's again.
If we see a new sell signal soon, that is a negative cross of the 14 with the 50 d. MA, the USD will be in very serious trouble. The important level to watch is 75. If this level breaks, the efforts of the bulls have definitely failed, and they will most likely toss in the towel and look for another (lower) level to try to make a stand.
Copper saw a long correction take place from the $380 level, but it now looks like this correction could finally be over or at least nearing its end. There are some positive signals showing up in the chart. For one, there's serious positive divergence in the RSI and MACD that should lead to a break of the resistance zone. Meanwhile, the buying power is pulling higher again, adding still more momentum to the current rise.
The pattern made in November and December has the shape of a reversed Head and Shoulders pattern with the resistance line at $320 acting as the neckline. A break through this neckline triggers a price target of around $355, well above the MA's which by that time should both be solidly rising again.
Therefore, the important level to watch is the $320 mark.
The above is an excerpt from the technical analysis portion of the monthly Resource Fortunes Premium Newsletter publication, available in its entirety for subscribers at http://www.resourcefortunes.com/. We currently offer a 30-day trial subscription for $2.99.