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Chart of the week: can gold prices climb even higher?

Posted By Lance Lai On In Economy,Markets | No Comments

The last time I spoke about gold was on Switzer on 21 July 2011 [1] on which I said that the gold rush was on and to buy, buy, buy! My targets were hit and exceeded following that interview. So where to for gold from here?

First, a quick wrap of my calls over the past three weeks:

  1. 12 March 2012: Spark Infrastructure (SKI) $1.365, buy. Now $1.495, up 9.5%.
  2. 19 March 2012: Envestra (ENV) $0.80 (ex div 2.9c) = $0.771, buy. Now $0.775, up 0.5%.
  3. 26 March 2012: Shanghai Stock Exchange 2,349, short. (If you followed my interview on Switzer on 22 March 2012 (http://www.switzer.com.au/video/lai-20120323): Shanghai Stock Exchange was 2,375, short.) Now 2,262, fall of 5% predicted. In that interview, the second BIG support marked “S” was in fact 2,262. I would close out this position. For now, after hitting support, it should float around these levels a little longer.

The above is a ‘Super’ start to my contributions to the Switzer Super Report.

Now onto gold and the chart of this week.

From watching my interview with Peter, readers will gain an understanding of my historic thoughts on gold, which has relevance to the way equity markets and other markets trade. This article extends on those thoughts. The chart below updates and builds on the above interview eight months ago.

What I like about the chart, now $1,672:

  1. Recent support levels of $1,633 have held.
  2. The upper trading range is now my target level of $1,766 (the yellow horizontal line marked ‘T’). This is a 5.5% gain.
  3. The 200-day moving average is still pointing up (yellow line).
  4. The gold price has tracked sideways in a range now for seven months around my last ‘Target level of $1,689’ set in July 2011. I have not spoken much of it, nor have I entered a position in gold in this time. If the current supports have held like it appears, not only is there a chance we go to the upper range, which is my target, but I am hopeful of a breakout of this range in the medium term. This is not so much a technical call, but a gut feel that we might be near a bottom.
  5. Gold has been reflective of (and at times pre-emptive of) positive moves in the equity markets. It has reflected the devaluation of the US dollar and hence stimulus provided to the US and global financial system.

What worries me?

  1. The 200-day moving average (the yellow line) has been broken and crossed from above two times already. It is flattening out.
  2. We have had three ‘Death Crosses’.

Important note

Please note, my views are not for the long term. My method results in views expressed that relate to an outlook that lasts weeks or at most months. For example, my view on Shanghai’s Index has for now been met and completed since 22 March 2012, 11 days later. Currently regards Shanghai, I am in a cautionary observant position.

Your utilisation of this information needs to take into account the timeframe I set. The stocks recommended as ‘Steady as She Goes’ may be held for the longer-term, which for me, means months.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice. 

Also in the Switzer Super Report