The Only Technical Analysis of Gold You Need Right Now
I'm going to keep this short, though the post will be thick with links for the curious. :)
Savvy precious metals investors employ a range of TA techniques within the rubric of an over-arching and far more crucial qualitative fundamental analysis. I'm not much for chart making, which thankfully is a skill covered for Fools by the amazing work of binve, but I have become well versed over the years with interpreting EWT, Fibonnacci, etc.
Sometimes, though, the best analysis is the simplest.
When it comes to understanding the gold and dollar markets comprehensively from both a fundamental and technical perspective, frankly Jim Sinclair has no equal. If anyone is invested in gold and not keeping track of JSMineset, then I dare say you are not practicing sufficient due diligence. :) His circle dots over the 'i's are funny to me, but the guy's expertise is no joke.
At this juncture, the technical characteristics of the USD and gold are so plainly visible in the simplest line charts that more "sophisitcated" techniques or indicators are not only unnecessary right now, but would only add noise to the picture. By zooming out a bit, the charts are telling Fools what's ahead.
Chart 1 is the USDX, showing in stark reality the steepness of the present short-term downtrend channel within the long-term USDX downtrend that began in 2002.
I think that the dollar cheerleading from Japan and Russia after the recent G8 financial summit represent a concerted effort to hold the line at the crucial 0.80 technical pivot point in the USDX by staving the receding tide of demand for USD debt to fund our aggressive spending activities. These efforts aside, I believe that the dollar lacks any fundamental support and so will continue the near-term downtrend more or less uninterrupted into the lower 0.70s before snother stand can be forged by those trying to counteract this major currency depreciation event.
Chart #2 is gold, revealing a reverse head-and-shoulders formation so clear that the upside-down dude can be heard saying: "Dude, gold's prepared to break out big time!". Gold will not dip below $860 on this correction, and in fact could launch at any time for one last minor test of $1,000 before moving quite swiftly above $1,200 ... faster than most might consider plausible.
From Jim Sinclair: "It is my opinion that gold is in a positive phase of this leg of the bull market, seeking $1224 as a first target after a normal $1000 battle."
Jim has predicted a major breakout for gold beginning in June. Time will tell if he nailed the short-term timing (it would not be the first time), but either way I agree with his thesis:
"I have no doubt that the gold price is going to and through $1000 here on its way to $1224 and $1650. Following that it will move on to Alf’s numbers [into the thousands] via its normal drama."
"Gold is the inverse of the US dollar and has been manipulated lower via the paper market. Such action creates a coiled spring about to squeeze Jack out of the Box."
"Financial TV’s new spin is that crude is the new gold. What they have missed is that crude is your first example of how a currency has the potential of delivering hyperinflation as cost push without any meaningful demand pull."
There you go ... along with the information in the links provided, especially binve's bog post, I think that's everything Fools need to know about gold at this point in time. :)