ChartWatchers

GOLD A "CAGED" ANIMAL

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Gold prices are trapped we are afraid; and they are trapped between the $1584 and $1646 levels - of which the lower boundary is the 20-month moving average; while the upper boundary is the 30-week moving average. We expect Gold prices shall break higher given the bullish consolidation forming; and given the Gold/Silver is showing signs of being overbought. All "good bull markets" in Gold are led by Silver...which is another story for another day. Our upside target for Gold prices is simply to "new highs" and let the market take it from there.

Gdx-gold 7-7-12

That said, if we look to play this surge in Gold prices - and we do believe they will surge in a type of blowoff that will leave many holding their breath at day's end - then we want to be long the Gold Shares (GDX or GDXJ) as they are have made their relative bottoms versus Gold prices, and are poised to move sharply higher versus Gold when the time comes.
Therefore, once the "caged" animal of Gold prices is unleashed - it should prove a terrifying and thrilling ride higher. We simply don't believe we are ready to ride the animal until $1646 is taken out and tested.

Good luck and good trading,
Richard

 

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