"When a stock or commodity advances into new territory or to prices which it has not reached for months or years, it shows that the force or driving power is working in that direction. It is the same principle as any other force which has been restrained and breaks out. Water may be held back by a dam, but if it breaks through the dam, you would know that it would continue downward until it reached another dam, or some obstruction or resistance which would stop it. Therefore, it is very important to watch old levels of stocks and commodities. The longer the time that elapses between the breaking into new territory, the greater the move you can expect, because the accumulative energy over a long period naturally will produce a larger movement than if it only accumulated during a short period of time."
Once the dam collapses, the minimum expectation should be a doubling of price. The charts posted below show what price tends to do when a previous old high is surpassed.
However, a close look at the charts will show that it takes more than one try to break down the "DAM." It often requires several attempts to smash through old barricades before they fall. Once the "DAM" is broken a return trip and test is usually required to see if it is permanently broken.
The monthly crude oil chart is a good example of how difficult it is to break through the barricade of a previous all time high that occurred a number of years ago. In the case of crude oil the previous all time high was 19 years old when the breakout attempt finally succeeded. When the price finally went above $41.15 it immediately declined to below the breakout level. Two months later the price finally succeeded in rising above the resistance at $41.15. However, five months later the price of crude oil once again retreated to just below the $41.15 resistance level.
The problem with expecting gold to make a new all time high soon is the fact that gold may have completed a five wave move prior to breaking out to a new all time high at $850.00. If there has been a completed five wave move before the break out we may experience a severe and prolonged correction before the next attempted breakout. If this happens it will probably discourage many. If you have taken protective action by selling at least a portion of your gold and silver share holdings, after the five wave move is apparently complete you will be in the position to buy back at potentially much lower prices. Gold is approaching the all time 27 year old high of $850 an ounce. So, be prepared for a failure to breach the old high at $850.
The actual gold high for technical purposes may have occurred at the $728 level. Since that point I believe the probability is reasonable that an expanded A, B, C, flat correction has been unfolding. If I am correct the final C leg down of the correction may be underway. This would mean that a bottom may occur within five months at Delta Long Term # 2 low.
The next chart is the gold monthly chart showing the completed five wave bull move followed by an A, B, C, expanded flat correction. Under this Elliott Wave analysis the conventional top was made at $728. The C leg should decline to below the A leg at $563.
Disclaimer: The contents of this letter represent the opinions of Ronald L. Rosen. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Ronald L. Rosen is not a registered investment advisor Information and analysis above are derived from sources and using methods believed to be reliable, but Ronald L. Rosen cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions.