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Gold shows signs of breaking out above $1,000
Posted on 22 May 2009 with no comments from readers
With thanks to www.golddrivers.com for the chart left (an excellent website for smaller gold stock picks).
While many bullion analysts are saying that gold is getting oversold above $950 an ounce, even a cursory glance at the graph left and you can see that gold would remain on trend if it now broke $1,000 an ounce and headed up towards $1,200 over the next month.
The build up of buying pressure in precious metals could easily become overwhelming, with top hedge funds and even Standard Chartered Bank revealed as strong supporters this week.
Clearly US dollar weakness is also compounding the actual buying activity.
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By Peter Brimelow, MarketWatch
NEW YORK (MarketWatch) — Is this it for gold? After a good week, gold watchers of all stripes think it may be. Again.
After Friday’s $956.50 close, Martin Pring — decidedly not a gold bug — set the tone in his Weekly InfoMovie Report:
“Gold could be on the verge of a historical breakout. Watch that $990-1,000 area like a hawk.”
Pring has always laid very heavy emphasis on the predictive power of gold shares. His analysis:
“The gold share ETF, the GDX [Market Vectors Gold Miners ETF (GDX 42.05, +0.81, +1.96%) ] has just broken out from a major base. Since the shares often lead the metal, this is a bullish factor.”
Dow Theory Letters’ Richard Russell has also been interested in GDX. On Tuesday he noted a “sensational” breakout. After Friday he said this:
GDX 42.05, +0.81, +1.96%
6040200
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“Ordinarily I would only add gold items on a correction, but gold seems on a roll now, so I added GDX.”
Two developments are causing the excitement about gold. From a charting point of view, gold shares are generally agreed to have broken out, meaning that gold itself could well be about to do something very important. Australia’s The Privateer (whose free U.S.-dollar 5X3 Point-and-Figure chart looks very handsome after Friday) describes the situation:
“What is being traced … is a gigantic ‘reverse’ head-and-shoulders formation. The trading range between US$900 and US$1,000 was broken early in April. Over the month of April, a tighter range between US$870-US$910 was established. Now, gold has broken back above that range. The ‘right shoulder’ on the ‘reverse’ head-and-shoulders formation is getting wider. … There are two major resistance points. The first is at US$955 … where the chart is now. The second is, of course, at US$1,000, the level reached in March 2008 and again in February 2009.” See chart.