In the golden egg below we can see some recent price action in this firm forum favourite. As is obvious, we are in a pennant. Breakout is imminent. It is unthinkable given recent gold action that it will be to the downside. We may have to re-test the white support just one more time before we go to .... where?

Let's now look at a longer term chart of KGC with a load of strange lines and squiggles drawn all over it in the manner of a three-tear old delinquent with a box of crayons and a freshly-painted living room.

First off - let me say that I have fiddled with the price. There was a reverse 3 for 1 split in the share price at the start of this year. I have multiplied the previous price range by 3 to equalise the two sectors of the chart, and then butt-joined the curves. The price scale reflects the here and now - relative movements are contiguously maintained.

I am now going to try to convince you that the above graffiti actually means something. Let us paint this picture by numbers....

These shallow sets of parallel lines connect inflections in the chart action. The key lines that really set up the 'current' if you like connect big points, like the top and bottom of major price moves (waves). The others kind of follow, offering support, resistance, or nothing at all. Their influence on price is not strong.

Broad-channels. These sets of parallel lines form rectangles in which major price movements are completed. Nearly always the path starts off in one corner of the rectangle, and exits diagonally opposite. The line sets are almost completely orthogonal.

Power uptrend lines occur whenever the price action is strongly positive, as it has been recently (since 2001 I mean). The power uptrend is teasing us at the moment - price action has slipped through one, and then a second channel. To continue upwards we must find third channel support. Last wave up there were only two channels involved (1993-1996), and therefore we might expect a fall back from here. Except fundamentals do not support this. There is no doubt gold is headed for $400 + by early next year at the latest. A third channel will form, IMHO.

Spot the stiff. 'Le Pendu' as the tarot reader would say - the hanging man. Does this head and shoulders shot remind you of recent pictures from the Baghdad waxworks? All in all, very positive for this PM.

Hidden away from the action is a huge fan, pointing out the direction of the main KGC wave. As to what this means I am not sure. Like dark interstellar matter I can only report that something is out there, not its true significance. Each fan line can form support or resistance, with a relative influence on price similar to the 1 & 2 lines.

Since gold hit $800 this sinusoidal wave has been more or less holding form, but increasing linearly in amplitude and wavelength with each successive cycle. If it carries on true to form the next peak will be around or above $50 in 2006. Until then the price will remain essentially in an uptrend, with the usual corrections and consolidations on the way up.

The focal point of the fan lies along the equilibrium price position (zero line) dividing positive and negative phases of the sinusoidal. It LOOKS like the sinusoidal might hit this point on the way back down in 2009.

This chart was the easiest to read. As usual there are sets of parallel lines connecting inflection points on the price chart. The big green dotted lines are waveguides. I am learning to sail in order to deepen my understanding of wave motion, and in theory class I learned about the aerodynamics of sail. In particular about the force arrow exerted by the sail on the boat, which was broken into a forward vector and orthogonal sideways vector. I thought this method of representation might prove useful in illustrating a point here.

Black orthogonal arrow pairs as shown on the chart always point forward (time) and go either up (positive) or down (negative). I have placed these arrow sets whenever the sinusoidal is orthogonal, ie tangential, to the green dotted lines - the waveguides. As have drawn it these events occur with regular periodicity of about 4 years. I can therefore deduce a May 2004 peak of around $50. $30 is probable in September/October this year, and touching $40 is 30% possible in the same time frame.

At time of writing I own neither of the above shares. Both look like excellent buys.

This chart was an absolute ~'@#@ to solve. The reason? The 4 year cycle is not one, but two slightly out-of-time frequencies. Two sets of peaks and troughs are overlapping. Sometimes they are in phase as when they sum to create a more powerful effect (the 1979 and 2001 troughs). Sometimes they are slightly out-of-phase where two peaks are created (1980 and 1984). And sometimes they are 180 degrees out of phase, where the weaker seems to put a dent in the larger (1992). The price wave is a candlestick envelope. Successive price movements upwards seem to follow trend channels. I have rather romantically (I thought) represented these as transverse waves lapping on a sandy beach.

Some details -

1. Blue transverse waves as drawn show a predominantly 8-year periodicity (actually there is evidence for a 4 year transverse wave - see the years 74, 78, 82)
2. The red 4-year sine wave cycle of the previous HL chart has now been replaced by 2 cycles slightly out-of phase - the slightly longer 'beach' cycle and the slightly shorter 'sea/sky' cycle.
3. The sun rises in Spring 2001signalling a new dawn for HL? Or is it just the locus of a slanted parabolic base guiding the price into a steeply rising bowl moving forward?
4. The incoming tide seems to be forming a massive reverse head and shoulders.

The minimum upside projection says $25-30 by 2006, based on symmetry considerations. However, since no-one knows how much silver should really cost anymore, anything is possible.