25/04/2009 by Philinje.

Well, gold didn’t get as low as $850 before breaking out of its consolidation last Thursday.

This post may be the most important one of all in terms of timing.

Ron Rosen, a follower of Gann, has been tracking the 30-year cycle in gold for a while now. 30 years ago next February, gold reached an all-time high of $850. That was about 4 times the level gold was at before its parabolic move in 1979.

What’s really amazing is how similar the price patterns are in April 1979 and April 2009, this month. Back in 1979, gold was also consolidating in a descending triangle and moved below it in a false breakdown. The exact same thing just happened this month.

Then May started the move up, and June was the first full month that stayed above previous highs. That was the launchpad.

Once the parabolic move starts, it can be hard to get in because the move up never lets up. That’s if you want to trade. If you are investing, just get in soon and stay put until late this year/early next.

Gann is legendary in trading circles because of his scholarly approach to market cycles. Ron Rosen is a modern-day equivalent extending Gann’s teachings in the current context of the markets. And the case is quite strong that the 30-year cycle is real.

I’ve followed gold since 2002 and to me it makes sense. The past 10 years have created a launchpad for a classic parabolic move. The parabolic move most people will remember is the Nasdaq bubble in 2000. But there are many examples in market history, including recently in crude oil.

Parabolic moves can be where fortunes are made. So depending on your risk appetite, you have to decide how much speculative capital you want to throw in and potentially throw away. Everyone’s situation is different.

How big will this move be? Very hard to say, and anyone who ventures a guess is either being arrogant or ignorant. Parabolic moves tend to move much higher than anyone could imagine. They just keep going up and up and up in a straight line.

Having said that, reasonable and prudent estimates could be $2000 to $10,000 per ounce. That’s 2 to 10 times the current price. I have read estimates (all prefaced with the same statement above) all over this range.

Getting out at the top can be tricky. So once things go vertical, keep trailing stops on all positions. The way down can be just as vertical as the way up.

Now, some things can be used to judge if this 30-year parabolic move is actually occurring or not. First, we should see something like a new high in May. And June should remain stable at that new level.

Also, the dollar is due to hit a mid-sized bottom around May 20. Same with the S&P. Both are likely to go to new lows toward end of this year. But the dollar may be surprisingly strong if de-leveraging grips the markets again.

My personal opinion is that the end-game is upon us in the financial world. So in general, being out of normal equities and currencies is probably prudent. You can play mining stocks for some spectcular gains, but be careful as they will be whacked from time to time as the general market crashes.

In conclusion, this coming week could be perfect to get into gold with an initial position if you have not already done so. As with all investing, easing in is best. Who knows, we could get a sudden wash-out down to $850 before the move really starts.

And there are people who believe $680 is around the corner. Maybe. But it doesn’t feel that way to me. If you are skeptical and want more proof, wait till June and see what happens. That will still be a good entry point.

Good luck. I just want to let you know the way things look to me.

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03/04/2009 by Philinje.

We may not get as low as 850, but gold decided to head down in the wake of the G20 meeting after consolidating for so long. When it sinks, it can be violent, so we may see a price as low as 850 for a brief moment or part of a day. Let’s see what happens at 890. All pundits I follow are calling for the beginning of a massive move up starting later this month. So loading up in mid to late April is a pretty safe bet, and 850 seems like a pretty solid support level. But you never know. We could get as low as 780, though it seems unlikely. The rally in equities may top later this month, coinciding with the bottom in gold. Things could get ugly with equities later this year so this is a good chance to get out of stocks generally. Gold and silver mining stocks like AEM and HL are likely to do very well going forward and getting in by end of this month could be a good idea. But they might also decline with general equities, at least for brief periods. So it might be prudent to wait and see what happens when the Dow tops and starts heading down. 

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