02 December 2009

Gold Chart Weekly Updated - Taking Some Profits

Gold bullion is nearing our intermediate price objective for the breakout which we have been following since US$1,020 per ounce. Here is the updated chart. Please note that these chart formations set minimum measuring objectives, but not 'tops' as in limits.

Trading discipline would suggest taking the initial investment off the table here, but let at least some, if not most, of the trading profits run. The daily chart has a higher objective of around US$1,250 and we may very well see an intra-week push up to that level before the end of the year.

Tim and Ben seem determined to inflate an asset bubble, and a continuation into the year end and beyond is certainly not out of the question. The Fed established its repuation for recklessness in the bubble which they inflated from 2003 to 2007, which manifested in stocks and housing. Have they learned any lessons? It seems like only new ways of doing the same old things, and on a grander scale. Larry and Ben have not had an original thought since 1994, and Timmy is a 'useful pair of hands.'

We are entering the period when we would start to anticipate a pullback and consolidation, at least, if not a correction in what has been an extraordinary run. We would prefer this, than a parabolic high. But we have to emphasize that the formation on the charts is a measuring objective, a target if you will, but not necessarily a top.

Mitigating our outlook is the apparent attempt by the US monetary powers to inflate the equity bubble, possibly into year end. Otherwise the fundamentals on many of the financial instruments are looking a bit frothy.

While we do not touch our long term metals positions, as we have not done since 2001, we will vary the trades and leverage as the intermediate situation indicates. But it should be clear that our trading suits our particular age and outlook, and financial condition and needs, and quite frankly, nerves.

And our nerves are getting old, and the markets in general seem a bit 'on the edge.' Le Patron's capacity for risk tolerance is not as vibrant as in day's long past. Although we do confess to a restless desire to short the US equity market, and waiting is becoming an act of will.

Investors who are more aggressive or conservative, with differing time frames, will best seek individual investment advice as always from a qualified advisor (especially if you can find one who is thinking 'out of the box' that is.) We cannot and do not give any individual counsel, and merely look at the markets themselves, and discuss generic trading tactics, and sometimes our own positions.

Despite a very recent surge in popularity, gold and silver are hardly mainstream investments, and few understand them. This will change. But it has not changed yet.

We want to emphasize that 1225 is NOT our ultimate price objective or a top call. This is a minimum measuring objective from the breakout from an ascending triangle of 1225 on the weekly chart. IF you accept that an inverse H&S pattern can be a consolidation pattern, then 1275 is the minimum measuring objective.

What is our ultimate price? Well, to answer that, we would have to know how thoroughly the Fed and Treasury intend to debase the dollar. Further, we would need to have a honest accounting of the gold holdings of the US, and any allocations or encumbrances on them from leasing activity.

Without such knowledge forecasting a 'top' is difficult. But for now here is one target price from a favorite analyst, David Rosenberg.