Monday, September 7, 2009
Executive Summary
- Gold had a techncial breakout this week to the upside.
- Fundamental support for gold is also strong at this time.
- Swiss vaults are full.
- Gold is accumulating to strong hands.
- Hong Kong “recalls” gold reserves.
- China changing the game?
Because it rose during both down days and up days for the stock market, gold has been acting in a fairly unusual way these past few weeks. What’s going on? I follow gold very closely, and here is what I am thinking at this time.
Before I begin, let me reiterate this: Every portfolio, no matter how large or how small, should have a core position of physical gold in it. Not paper gold (mining shares, ETFs, futures, etc). I am talking about hard, physical gold that is either in your possession or in a vault. If you have the means, you should have some in a vault outside of your resident country as well as within it.
Gold’s Technical Breakout
From a purely technical standpoint, gold broke out with conviction from a triangle this week (see chart below). The next usual step to this process would be a back test of the breakout.
Over a slightly longer-term outlook, gold has a very interesting chart. For starters, it has about as clean an inverted head-and-shoulders setup as one could ever hope to see, and these formations are considered to be extremely bullish.
There is also a wedge formed on this longer-term chart, which has clearly been breached to the upside, if you draw the lines like I have below. The blue lines paint the wedge, while the purple line shows the battle line where heavy resistance is likely to be met.
If gold pops over that, then I’ll have to break out some much longer-term charts to pick some new price targets. The green circle indicates that gold is not yet ‘overbought’ on the weekly chart like it is on the daily chart, so there is a mixed signal across the time frames.
by jag