New York gold
Continued rise to $1,190 or $1,300 likely
In September, gold broke out of the triangular holding position it had held fast
to for a half year since hitting a high of $1,002 (2009/2/9) early in the year and
has been on a strong uptrend since. It easily pierced resistance at $1,065,
making it more likely in our mind that it will extend its highs to $1,190 in the
near term, and to $1,300 or even $1,410 by the end of the year.
Pushed past $1,065 (10/13) in good time and is extending upside
In last month's edition, we said the near-term focus would be on a peak at
$1,065. Gold did end up peaking temporarily at $1,065 (10/13) as it reached
theoretical resistance at that very level, but the ensuing correction evolved
much as we expected—playing out at $1,030 (10/28) and realizing a
theoretical value derived below—and gold quickly broke past its previous high.
$1,065: Derived by adding to $705 (2008/11/13) the magnitude of the rise
from $644 (2007/6/27) to $1,004 (2008/3/18)
$1,031: Derived by subtracting from $1,065 (2009/10/13) the magnitude of
the decline from $969 (2009/8/4) to $935 (2009/8/17)
The next upside resistance level can be found at $1,143, but even if gold were
to briefly peak there we think the correction would likely end up being shortlived
and limited. Judging from how things have evolved since September,
gold's current upward momentum is extremely strong and is not going to stall
easily, in our view. We see a high likelihood of gold continuing upward to
$1,190 or $1,300—the key upside resistance lines we have highlighted since
the start of the year—with no major corrections intervening. If it blasts through
1,190 without difficulty, it could even extend its highs to $1,410, in our view.
- $1,143: Derived by adding to $705 (2008/11/13) the magnitude of the rise from $566 (2006/10/4) to $1,004 (2008/3/18)
- $1,189: Derived by adding to $721 (2006/5/11) the magnitude of the rise from $253 (1999/7/19) to $721 (2006/5/11)
- $1,303: Derived by adding to $705 (2008/11/13) twice the magnitude of the rise from $705 (2008/11/13) to $1,004 (2008/3/18)
- $1,415: Derived by adding to $253 (1999/7/19) twice the magnitude of the decline from $834 (1980/1/21) to $253 (1999/7/19)
Linkage with euro/dollar rates weakening
As we mentioned in last month's edition, gold is starting to show signs of
decoupling from the euro/dollar rate, as it has kept extending its highs even
from October, when the euro was no longer able renew its highs against the
greenback. As a result, we believe the price of gold may keep rising on all
fronts against the major currencies for a while longer.
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