Dr. Clive Roffey
The Silver price data is interesting. The oscillator has fallen well under the previous bottoms to make a new low. But the metal price has failed to follow. This is a buy divergence. It indicates that the price will turn and bounce back up to test the previous high.
This is NOT a selling area but a BUYING zone if you missed the first bull run.
Exactly the same bull divergence data is applicable to the gold price. In addition there is a definite five wave downside move from the beginning of April peak.
Once again I rate this level as a HUGE BUYING zone for gold metal and stocks. In the overall scheme of things this is a minor correction even though the actual moves have been traumatic. My upside on bullion remains around $485 for the next phase.
The HUI index is the best to study gold share movement as it refers to un-hedged stocks that are the most volatile. This is a classic study in RSI levels. The RSI in the bear trend from 1996 to 2000 stayed under the 65 level and fell well under the 30 level. But in the bull trend the tops rise above the 70 line and the lows remain above the 40 level. In addition the recent correction has mapped out a flag pattern that indicates further upside.
The FT Gold index has a more global view of the gold stocks. The same RSI parameters for bull and bear phases are evident. In addition the upside trend remains intact. The index has formed a small flag pattern and pulled back to the support level at 1500. Also note the bull huge divergence as the oscillator has made and equal low whilst the index remains well above. All this data indicates a BUY zone NOT PANIC SELLING.
The XAU index has mapped out a classic Elliott format. The five wave upside thrust with the Zig-Zag A, B, C corrective wave. The C wave has, as required, pulled back to the 3-4 correction to wipe out the whole of the previous fifth wave. This indicates that the end of the correction is very close at hand and that the bull trend will resume pushing the index well above its previous December peak. Another BUYING zone.
The Toronto Gold index has also mapped out the identical five wave thrust and A, B, C wave correction. Once again the C wave has pulled back to the main support at the 3-4 level. This indicates the corrective phase that has been in force since December has ended and that a brand new bull movement is about to commence taking the index well above the previous December peak.
All the above data is BULLISH and indicating a BUYING zone NOT a PANIC SELLING area.
Dr. Clive Roffey
23 April 2004
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Gold Action is a fortnightly commentary on global gold markets produced
by Dr. Clive Roffey who has been a leading independent commentator on
gold markets since 1969.
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