Charting Gold

By Scott Silva

Editor,  The Gold Speculator

2-22-12

The charts are displaying new strength in gold and silver. We will see new highs in gold and silver this year. It’s not too late to buy the precious metals at bargain prices.

Technical analysis is a powerful tool for understanding the market for a traded good. Technical analysis employs time-tested techniques for predicting future price levels. The successful technical trader uses a combination of indicators to support the decision to take a long or short position in a given commodity. The planets are lining up in favor of another leg up in gold and silver. Let’s examine what the charts are telling us about gold today.

First, gold has broken out of a bullish falling wedge chart pattern dating back to September 2011.

The falling wedge pattern can be a continuation or a reversal pattern. It this case, it is a reversal pattern, signaling a reversal of an intermediate bearish trend. The falling wedge is a bullish pattern that begins wide at the top and narrows as prices gradually move lower. This price action forms an extended cone shape that slopes down as the reaction highs and reaction lows converge. The pattern is defined by the down-sloping upper resistance line and the lower, converging base support line.  The bullish breakout occurs when price action closes above the resistance line (upper descending tend line) with confirming volume. The point count for the pattern is calculated by adding the magnitude at the widest span to the price at breakout.

We can see the falling wedge reversal pattern in the daily basis chart for April COMEX gold above. The intermediate bearish trend began in early September 2011. The price at the break above the resistance line was 1674.40.  The point count is 321 which sets the price target at $1995/oz.  The breakout is confirmed by significant volume at the breakout day, January 25^th.

We can see the same breakout in gold using Ichimoku Kinko Hyo indicators.

Here we see spot gold on a daily basis with Ichimoku indicators. The January 25 breakout above resistance on higher volume is highlighted in the oval. Today’s chart shows all Ichimoku indicators are bullish for gold. Price action is above the cloud, which is bullish. The Tenkan Sen made a bullish cross (from below) the Kijun Sen back on January 17^th. The projected cloud is bullish (shaded green).  And the Chikou Span is well above price action and above the cloud, which is a strong bullish signal.

Silver is displaying similar bullish patterns and indicators. So are selected gold and silver stocks.

Now is the time to own gold and silver.

Investors from around the world benefit from timely market analysis on gold and silver and portfolio recommendations contained in The Gold Speculator investment newsletter, which is based on the principles of free markets, private property, sound money and Austrian School economics.

The question for you to consider is how are you going to protect yourself from the vagaries of the fiat money and growing inflation?  We publish The Gold Speculator to help people make better decisions about their money. Our Model Conservative Portfolio has outperformed the Dow and the S&P 500 by more than 3:1. Subscribe at our web site www.thegoldspeculatorllc.com  with credit card or PayPal ($300/yr) or by sending your check for $290 ($10 cash discount) The Gold Speculator, 614 Nashua St. #142 Milford, NH 03055