Gold holds $1000, but then what

Gold has held $1000 for several days, a very bullish sign. Some are saying this means $1000 will become support and it’s onwards and upwards from here.

The dollar can’t seem to get a rally underway and now that it is down to 76, gold has cruised straight back to its high territory around $1010-20. And the commerical traders have increased their short position to the highest level ever.

So it’s time to be cautious. The dollar will almost certainly rally to some degree, and gold will likely test the apex of the triangle at around $960. Delta timing shows a long-term high for the dollar in December-January, but long-term timing points for the dollar are relatively frequent.

Rosen thinks a correction in gold will last for the next year, starting now until next Sep-Oct. If instead gold powers higher in October, that is a valuable clue that maybe the C leg down won’t happen.

Clive Maund has updated his views somewhat and talks about the apex of the triangle:

http://www.gold-eagle.com/editorials_08/maund091909.html

Significantly, he is now talking about a breakdown below the apex as an important sign. Of course that may never come to pass but he hasn’t expressed that concern before.

Now what would cause a decline in gold for a year? Maybe another bout of deflation rearing its ugly head? Yet there are people talking about the strongest economic recovery in history and there is an exceedingly bullish sentiment in equities. This could be a red flag from a contrarian point of view, but this market seems dangerous to short.

The following article lends some nice perspective to the current state of the markets:

http://www.gold-eagle.com/editorials_08/lerner092009.html

The author points out that one year ago the markets were practically in a panic at a level higher than the current one. Then of course the real panic happened. The charts in that article are a good read of the dumb money, smart money and other indicators. Basically, there is a lot speculative froth currently, the smart money is neutral and insiders are selling in force.

Well, early October is the first point at which to attempt a stab at what happens next, and then we’ll see. A breakdown below the apex at $960 will be the thing to watch for, and then to see if that isn’t a fake breakdown, meaning the price shoots back up in short order. Until then, be cautious, take some money off the table, and make sure you are ok with a sizable correction.

This entry was posted on 23/09/2009 at 12:49 pm and is filed under Gold. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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