ZLATO – dlhodobý trend je pozitívny

Z dlhodobého pohľadu má zlato stúpajúcu tendenciu, avšak v strednodobom horizonte sa očakávajú korekcie.

The essence: great traders can go wrong but rules remain the real gurus. This is the reason something as basic as channel psychology with rules can work. Simpler the system, the better it should work.

We have kept you on track with Gold from the May 2006 top and even illustrated to you the upsurge from 575 supports back to 660. And if this was not enough, all our last few Gold reports have been talking about, 690 as the level to watch out after 640. We did hit our anticipated target again.

But what happens from here is indeed a tricky call. The normal channel (above) has witnessed a third breach at the 20-year resistance line. The more a channel psychological resistance is tested, the more likely it is to be broken. The rule is simple. If 690-700 breaks, channel supports should push prices to the next level at 800. But 690-700 does not seem an easy level to break through.

First of all, the upmoves in Gold have historically lasted five years on an average -- 1970-75, 1976-80, 1985-88, 1993-96 and now 2000-2007. This makes the current upmove the longest in the history of Gold. One can interpret this in two ways. One interpretation could be that we are in the beginning of an all new bull market in Gold, which could not just break the magical 1000 level but also make it look minuscule in times to come.

The other way to look is that this is just another extremity which will come to an end as the markets stabilise and the Golden Hedge loses its charm as the crisis commodity. We belong to the first school of thought.

Although we think the commodity is at a short-term extreme, there is bullish signature to prices. It looks like we are in a multi-decade bull market in Gold with a 30 year cycle. The cycle started in 2000 and should continue till 2030.

Bullish markets have an extended upmove and a short downturn. Having run-up for seven years, we have at least seven years more, statistically, for Gold to register the high of the decade. And if we add the bullish extension, we can easily see Gold headed up till 2020.

However, there are certain other observations which depict a negative undercurrent in the immediate term. First, we have the Key Reversal monthly bar for Gold at the May 06 high. Key Reversal bars signal exhaustion.

Second, the move down from the top has barely completed eight months which means the character of prices is of an intermediate degree. Since the start of the bull move we have not had a fall of more than nine months, which is needed to correct such a large upmove. If Gold continues to move up without a sizeable correction in time or price, it could be prone to a price shock, which might be tougher to handle for both traders and investors.

Third, 690-700 marks a key Fibonacci confluence level. So even if we don't get a multi-week decline from here, a short-term dip cannot be ruled out. Fourth, Momentum on a weekly basis continues to diverge from prices. Plus, we have a whole host of other Gold related indices and stocks, which do not conform to Gold moving up from current levels.

So as a rule we will still give the potent bar a chance before we pull off the lid from our 1000 target on Gold. We have put up the long-term count on Gold, which seems to be completing the first primary wave upwards.

The sharp second primary wave down should also fall at one of the channel psychological supports (illustrated), where we will be positive again. Once our 690 target is met, we would like to be a bit cautious. And as we said a host of other Gold indices viz.

Source: BusinessSt

01.05.2007