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Gold will explode to $4000 in phase 3 of the bull market

This report will focus on one thing and one thing only, gold. It is the one and only market where I don’t question if there’s any value.

Of course you wouldn’t know that by listening to the mainstream media as they parade out one “expert” after another in an effort to convince the world the bull market in gold is over and done with. It happens every time we experience a correction.

This is the same crowd that says every decline in the Dow is an opportunity to load up on cheap stocks, and yet they can’t wait to through dirt on the gold bull’s grave. Since most people know little or nothing about the yellow metal, it’s easy for these analysts to gain a following. After all they are the experts!

On Friday it was more of the same as we experienced a bear raid early in the morning and the Bloomberg crowd warned that more pain was sure to come. When spot gold bounced back to close down 7.90 at 1,640.90, after a failed attempt to test strong support at 1622.20, they simply moved on to another whipping boy.

Friday’s intraday low was at 1,625.70 but price recovered to finish well above it and marginally below good resistance at 1,641.30.

When gold put in a lower low a couple of weeks ago, I came out and told clients right then and there that I thought the bottom was in. After watching gold’s behavior following the big sell-off two weeks ago, I am now convinced that we’ve seen the bottom and the end of the correction.

Also, the overall decline (using closing prices) equaled $364.00 or 19.2% and was middle of the pack when compared to previous reactions that checkered the eleven-year history of this bull market.

So we have a low coming after two symmetrical legs down, you have a Fibonacci connection, and you have a strict adherence to the 90-day cycle. When I add it all up I would say that you have an 80% chance that the bottom is in and the only piece missing is a close above the trend line that connects the all-time closing high with the lower high and currently comes in around 1,715.00. I believe this final condition will be met within a couple of weeks.

As some of you know by know I sit through reactions in the gold market and try to add on when I think the reaction has run its course. That’s why I purchased gold at 1525.50 and I’ve added on along the way up with my most recent purchase coming at 1,642.00.

Friday’s early morning bear raid scared a lot of investors, but the reality is that it failed to test even the first level of good support at 1,622.20. It then went on to recover most of that decline by the time the spot market closed later that day. That’s bullish behavior.

Finally, it is worth mentioning that gold has exhibited a change in character. For the 90 days that it declined it moved inversely to the US dollar and in lock step with commodities. Now gold is rallying even though the dollar has made new highs and in spite of the fact that commodities are being sold off.

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Posted by on Jan 16 2012. Filed under Gold predictions. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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