Is Gold’s Sharp Correction Nearly Over?
Jay Taylor
The sharp decline in the price from an average of over $950 per ounce in March to $839.67 has been harsh and
painful. To make things worse, the price of gold stocks, especially the juniors, never did enjoy anything like the kind of increase we would have expected with bullion’s surge.
We do believe however that gold got ahead of itself a bit when it rose above $1,000. The pullback now, so long as it remains aboved our 40-day moving average (red line) should provide a base from which the next run in gold should take place. Here is what our technical guru, Roger Wiegand, had to say about gold as we headed into the Labor Day Weekend.
“Our weekly gold chart shows price dropped out of the air leaving a large trading gap. Recovery has been clinging to $800 and a new support has been found. Notice the critical support line just below $800 was not violated. While momentum (PMO) still indicates failure (weekly chart) on the daily report it has already curled up with more volume. Our broker told us this week, the volumes just before and after Labor Day are light as traders remain on vacation. The trading season resumes on Tuesday, September 2, but the volumes might not report normal numbers until the following week of 9-8-08.
“Traders next critical price is $850. This price point is very heavy support and resistance for gold. It doesn’t show it that well on this weekly chart but this is the “go to price” for gold between 842 and 865. We forecast
that price gap to fill on a rally bounce and then stay there until the middle of next week. After that, gold could take off with some power especially if some very negative events hit markets in the middle of next month. Traders holding shares should continue to hold them and expect the first fall peak in the first week of November. After that historically, we see profit-taking and decline in prices until after New Year’s. Then, two new rallies begin in January and March with some selling in the middle on cycles, time and profit-taking.”
Roger also forwarded the following message to me via email before I went to press today. Here is what he said: J- while I used the dollar chart as my chart of the week, the more important one for your letter is the GDX Shares Chart on Page 13 of Trader Tracks. This shows the huge turnaround in precious metals stocks that is just now starting get underway. Not the matching support from August 2007 to August 2008. The new base is in,
momentum (PMO) is crossed and rising, and price rallied to 20 day average.
August 30, 2006
Jay Taylor, Editor of J Taylor's Gold & Technology Stocks
www.miningstocks.com
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