Golden Steps To A Higher Gold Price

steps to a higher gold priceThe price of gold is looking good this week. This begs the question:  Is this the rally everyone’s been waiting for?

Here’s what we’re watching…

We can remember when gold started turning bullish back in 2001.  Sentiment was so dark after a 20-year bear market, that it almost seemed unreal. 

Our indicators turned bullish in August 2001, a month before the infamous 9/11. While this also gave gold a boost, it wasn’t the driving factor by far.

With sentiment so dreary, we made up the analytical steps system.  We said if the price of gold could climb to the next step, the bull market would be getting stronger as confidence would be improving.

Chart 1A shows some of these bullish steps leading up to the 2011 record high…and it shows the bearish steps since then.

“C” Rises In Bull Markets

The gold price rose from the 2001 low near $250, for example, to the 2008 high near $1000, gaining 300%.  The financial crisis then pushed gold down to the $700 level…as many felt the bull market was over.

But sure enough, by September 2009 gold burst through $1000 moving into record territory in the best C rise in this secular bull market.  It moved essentially non-stop for two years before reaching its peak in 2011 near $1900.

Note how different C rises move in a bull market, compared to a bear market. They tend to be the best intermediate rise in a bull market -- and they tend to reach record highs. Bear markets are another story.

Gold In Bear Markets

Gold has had two bear market C rises so far in 2012 and 2014, and both failed to have good strength.  The 2012 rise was followed by a nasty gold decline in 2013…the worst fall so far.

Interestingly, the 2014 C rise was moderate and the D decline that followed was not a steep one.

This shed some light of a change. Will the now almost two year bottoming action, marked by the two D lows, really be THE bottom?

We’ll soon find out…and this brings us to today. 

For now, keep an eye on $1170 and $1220.  A break either way will tell us a lot about the current C rise.  A sustained break above $1220 will be positive sign of a turnaround.

If the gold price then rises above the 23-month moving average at $1265, it would turn bullish for the first time since 2011.

We could then see the $1536 step tested.  If this were to happen in the current C rise, it would be shouting: Load Up On Gold!

Courtesy of www.adenforecast.com

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Mary Anne & Pamela Aden are well known analysts and editors of The Aden Forecast, a market newsletter named 2010 Letter of the Year by MarketWatch, which provides specific forecasts and recommendations on gold, stocks, interest rates and the other major markets. For more information, go to www.adenforecast.com

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