Gold is really acting civilized the last couple of days. No panic, no waterfall. That says quite a bit about the strength of the gold argument following a heavy handed margin increase by the CME. Price closed well off the lows of the day and just reached the top of the short term trend channel. I expect the correction to continue down to the 18 day moving average, currently at 1662 but climbing rapidly. I expect this average to continue to climb to at least 1680 and certainly higher. Stochastic is flirting with the 80 level again and a cross there sets up the 18 day moving average as initial support. Also, the Fibonacci 38.2% retrace is at 1693 and may be as far as any correction can go if more sovereign debt fears materialize next weak. I like a move to the bottom of the trend channel around 170o, setting up a move to higher and ultimately to new highs later before the end of the year. Various support levels are depicted in green, with 1644 being critical to maintain trend.
The longer term chart puts the move in gold this weak in perspective. We are due for consolidation again to form another “step” on the staircase. The problem I have with that scenario is that we are entering the strongest seasonal period for gold and these consolidation patterns typically have developed over several months. If we are going to consolidate, the highs have likely been put in for the year. I suppose it is possible and we will have to let the chart do the talking. At any rate I expect a move to the top of the trend channel and worst case back into it to track the upper boundary.
PHYS, my choice for gold exposure in retirement accounts such as 401ks, is shown next with support levels shown in green. The technical studies of course will be similar to the spot gold chart. Price has corrected back into the Bollinger bands as RSI ends up at 70. Stochastic is still embedded suggesting that pullbacks offer a buying opportunity in a market with accelerating momentum higher. If stochastic crosses 80 then the 18 day moving average becomes the initial price target. It is currently 14.31 and climbing rapidly toward the price gap between 14.40 and 14.60. In a convenient turn of events, the Fibonacci 38.2% retrace level lies dead center in the gap and provides a natural level of support. The recent gold acquisition by PHYS and the issuance of new shares has been digested and the result is that price never extended as far outside the trend channel. In fact it is back in and already in the middle. I like buys anywhere near the gap, say the 14.50 level.