Wednesday, June 15, 2011

Gold Thought For the Day - How About a Triangle?

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My daily study of the markets always brings me back to my favorite chart - the price of Gold. What a powerful and steady secular trend with no signs of being near a top. All those who continue to insist that Gold failed to hold steady during the Great Fall Panic of 2008 always neglect to extend their chart out to the evil, 666 bottom in the S&P 500 during March of 2009, when Gold was already back at $1000/oz despite the world coming to an end. Physical Gold (and some silver) held outside the banking system should be the bedrock of any serious precious metals portfolio. The long-term Gold price chart remains a thing of beauty, but I also focus on the short to intermediate term as a trader.

My Gold thought for the day relates to the current short-term correction in Gold that began in early May. My question for Gold is simple - how about a triangle? We haven't had one in a while and it would be a perfect way to fake out a lot of people. Here's a 2.7 year daily chart thru today's close:

Now, I am no Elliott Wave guru, but hey, one of the major so called experts on Elliott wave has been wrong on his Gold count for 10 years...

Here's a 4 month daily chart of the GLD ETF (so I can show my favored candlesticks) thru today's close with some additional thoughts:

It's just a thought and I am not married to this scenario. Gold could just as well collapse down 4-5% into another zig zag and tag its 150 day moving average, but that would be what most traders are probably expecting, so perhaps this is what is least likely to occur? A milder Gold price correction that has already seen its low but needs to burn a little more time while going nowhere significant in price doesn't seem far-fetched to me.

Gold is acting like the world's reserve currency and will continue to do so until the current monetary system blows up and is replaced with something more sane. The paperbugs won't get it until the Dow to Gold ratio has already hit 2 (and we may well go below 1 this cycle). Oh well, we Gold bulls are going to need someone to sell to near the top...

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