Sunday, December 02, 2012

The GOLDen Consolidation Range

In the previous post discussing Gold in January 2011, it was said that “the next target after the following likely correction is 1600 which may be touched in January – March 2012. Nevertheless, we should be aware that the uptrend may accelerate and become exponential at some point and even higher highs may be registered in a shorter cycle than the regular 34-week cycle.”

After a shorter than expected correction, the uptrend indeed accelerated, tested and exceeded 1600 target in July 2011 overshooting towards 1900 in less than two months before collapsing back to 1600 area. Since September 2011 Gold is moving in a consolidating range between 1550 and 1800.

In the weekly chart above we have the 34 and 21-week cycles centred on the September 2011 important plunging low. The projected cycles point us to end-of-December and beginning-of-January as potential important inflection interval.

In terms of price we notice Gold is in the upper half of the mentioned range which improves the likelihood of a breakout higher in the direction of the long term uptrend thus putting an end to the long consolidation period. Nevertheless, a break below the mid-range around 1675 will most likely keep the price in the same range or even threaten the 1550 support area.

In the daily chart above we have 55-day cycle centred on the latest significant low from May 2012. The projection gives us beginning of January as a potential inflection period.

We notice Gold broke into the upper half of the range in September 2012, travelled to the 1800 resistance area then corrected 61.8% of the latest up-thrust which coincided with the 1675 mid-range. The upturned that ensued was capped so far by the 61.8% (1750) of the latest downtrend but the price is still in the upper half of the range.

1750 and 1800 levels are deemed as key for the next move in Gold. If 1750 is exceeded, Gold can challenge 1800 and stage a breakout in the direction of the long term uptrend.

A break below the mid-range around 1675 will push the price back in the lower half of the range and may even threaten the 1550 support area.

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