Chart Courtesy of Stockcharts.com
TREND ANALYSIS - The powerful break above the $850 previous high is a clear trigger that signals a significant rally that initially targets the next high of $989. However despite the increase in volatility, gold’s most recent action has seen gold retrace to back below $900 in recent hours with last price at $880, which suggests a correction against the powerful rally is underway targeting a retracement to $850 breakout point.
The next resistance level above $989 is the $1033 March high, which given the vicinity to $989 would probably break soon after a break of $989. However Gold resistance at $989, would target a retracement to support at the recent high of $926, with strong support in the range of $926 to $900.
Failure to break $989 - Would see gold continue to develop a sideways pattern in the range of $989 to $800.
Price Targets - The 2006 downtrend witnessed a decline of some 185 points, the subsequent rally to 1033 was up 490 points, or 264%. Gold also made an intermediate high at $850, up 308 from the low or 165% of the 2006 decline. The downtrend from 1033 to 740 represents a decline of 293 points. Therefore the two trend targets above the 1033 high are 1220 and 1516.
MACD - The MACD indicator is heavily oversold after registering a sustained bear trend of 6 months which is similar to the length of the downtrend experienced during 2007.
SEASONAL TREND - The recognized seasonal pattern for gold is for a rally from late July / early August into February. Clearly up until last weeks action Gold has been ignoring the seasonal pattern. However the recent catchup move implies that Gold is now targeting a trend inline with the seasonal pattern staring a month late, therefore this suggests a + / - one month up trend target for a gold of between late Jan to Late March 2009..
ELLIOTT WAVE THEORY - The decline from the March 2008 high clearly indicates a simple ABC wave pattern , each of which were themselves comprised of abc waves. This strongly suggests that the decline was corrective, and therefore implies a 5 wave advance to above the 1033 March high.
Gold Forecast Conclusion - The immediate action suggests an ongoing correction towards $850. Gold has experienced a major significant breakout to the upside which is targeting a volatile up trend to $989, on break of which Gold will target a new all time high of above $1200 by Feb. to March 2009.
A FAILURE to break above $989 and follow the forecast trend would imply a sideways trend in the range of $989 and $800 for probably the next 11 months i.e. until the next bullish seasonal time period approaches.
