Short Term Gold: Up, Down, Or Sideways?

By Roger Wiegand    Oct 9 2009 9:22AM

Technically, it appears our daily most active December, 2009 Gold Futures are approaching a top this Thursday morning in a normal Elliot Wave set of five waves. We have been forecasting the key numbers to be 1032.50 and 1050.00. Earlier this week, we cracked the 1032.50 barrier, held and moved higher in this rally. Today as we write at 1030AM New York time, those gold futures opened at 1042.70, had a trading low of 1037.80 and a high of 1049.70. While anything  can happen, we expect a gold top is near for this rally; FOR THE SHORTER TERM.

In another related forecast we said gold would probably find a new low on Friday, October 10, 2009. Should today prove to be the top of wave five up, then Friday might produce a new A wave, of the ABC normal correction, down to support.  With so much buying pressure on gold and the US Dollar showing steady weakness, we suspect gold will trade in a choppy sideways channel for our ABC mild correction followed by the next 46 day gold cycle of bottom to top to bottom. This is the last 2009 main event for gold and silver.

The most significant gold events are to crack the 1050 gold sound barrier  and hold followed by a potential to a new break-away rocket-rally toward 1250-1260; our long ago high December futures trading forecast for 2009. Do we see a new cycle to 1250? I think I can see it very clearly.

Months ago, the large stock index markets were showing us technicals signaling a substantial smash this fall. We called the stock index top for 9-15-09 and it turned out 9-21 to 9-22 was the event. Since those reports, the S&P has been generally hanging around 1050, which we also predicted.

Keep in mind when a pivot reversal arrives they can fool us and extend beyond cycle dates. This then usually produces normal double tops before the selling. Reversals can in fact show a sloppy triple top to further confound the traders. Mainstream shares, if they are going to correct at least 10-12% this month, better get busy and get it over with or else our normal, annual rally date for them beginning November 1 could get pushed forward in time. If this happens the cycles for 2010 will be affected and delayed as well.

Gold Bull is angry and really pawing the ground; more so now than ever.

Drastic abuse of currency and bond markets to “Save The System” by central bankers, the Federal Reserve, US Treasury and their foreign helpers are all in cahoots to save old paradigms gone for good. Unsubstantiated and denied rumors of a foreign cabal conspiring to trade oil in a basket of currencies excluding the dollar rocked the currency boat this week. We cannot be sure but our motto says, “Where there’s smoke, there’s fire.”

Those alleged monetary leaders and authorities are after power and money. This is just normal unbridled greed as they anxiously strive to ease the dollar down slowly reducing their massive debts by inflating them away.

These guys and gals have no other choices. They have no way out. In their view, if they can ease the dollar down over years and let gold ease up over years, they win. This supposedly prevents major monetary accidents of the kind Germany endured in 1921-1922 with hyperinflation. This is really tricky stuff and we say they screw it up.

Now, however, very responsible and mainstream analysts are saying the H word-HYPERINFLATION. This event is not your garden variety Jimmy Carter mess with prime at 21%, this is pure mayhem and a cataclysmic game-changing event with the potential to bring down governments.

One of our favorites from Asia was on Bloomberg TV two weeks ago and flat out told the audience it ends with an implosion. He told us this means no more markets, no more trading, and no more Bloomberg, which really raised some eyebrows. This man is highly respected and revered as a successful fund manager and predictor of financial events world-wide. Normally, those kinds of statements are never uttered on mainstream media and if they are they usually end with that person getting fired; pronto.

We watch this stuff closely and read huge piles of info each week as that is our job. These radical comments were previously confined to nut-job websites. Not any more. I can’t remember the others but there have been four or five other top guys saying similar things.

Weekly Gold Shows An Entry To New Rally Era.

See the price pop above the red dotted line in the upper right hand corner? This signals the rally beginning on our forecast.  Earlier, we see a very bullish inverted head and shoulders from April, 2008 to September, 2009.

Daily charts are for shorter cycles and represent shorter term trading action. When we see a move like the one shown above on a weekly chart, this is serious stuff. It becomes even more serious and definitive when you see a similar move on the monthly charts.

Our best analysis comes from interpretation of a grouping of charts; not just one or two. If we can reconcile the moves in currencies, bonds, stock indexes, gold and silver and other commodities, we can see the real hard core trends. One or two charts could be maybes. Ten of them cannot be denied.

Now let’s see how the gold trading fits with silver and the precious metal shares.

Silver Signals Long Consistent Rise From Double Bottom A Year Ago.

Cash silver is a little behind gold in wave counts. However, it trades faster and will catch-up. Silver follows gold on the larger picture but can be a week or two behind or ahead of gold in primary moves. This is the cash chart but  the December daily futures chart is advancing toward wave five.

Our previous highs for silver before the 2008 fall smash were trading at $21.50-22.50.  Before we see those numbers again we must rally to $19.50-19.67, correct and then revisit $21.50. After $21.50 the next move is toward $25-$26 followed by $30.00.

XAU Shares Broke Out Above Moving Averages And Two Channel Lines.

Next XAU resistance is 180. (Note price cluster October, 2008 to January, 2009).

Our Summary Shows An Impending Top With Following Price Rebound.

Gold for 2010 can be forecast technically within wider limits. This wider dimension must consider radical problems produced by higher inflation, more central authority mistakes, trip-wires from foreign events, and the measure of rising fear among the Sheeple. All of these factors come into the gold price mix. However, we can offer a conservative measure for gold prices at $1325 in February and $1375 in April, 2010. Silver could touch $21.50 in February and $26-$30 in April for the spring high.

Keep in mind the big stock indexes we forecast to rally from November to May, 2010 with one correction in February. This will fool the herd into believing all is well. It is not. But, precious metals shares and other commodities will enjoy rallies from next month through April, too. However, next spring we forecast a bolt of lightening hits almost all markets in June-July, 2010 after May sinks into the abyss.

This is the cycle where several very severe problems hit us in real estate, banking, credit, government failures and who knows what from the Middle East. Many view this pre-May cycle as the last chance to sell into strength within the main stock markets. Precious metals, after that time should go their own rally way.

Finally We See Mr. Dollar Sinking To The Celler. Steadily Losing Value.

Since US Dollar represents the reserve currency for 85% of the world, moves are glacial. Here we note a list of negatives telling us the dollar sinks much further.

(1) Price is beneath all moving averages. (2) Price is under three channel line failures. (3) PMO momentum is turning down. (3) We know the Federal Reserve is buying our own bonds as they cannot be sold. (4) We know the unreported quantity of dollars being printed is extraordinary. (5) We know the holders of dollars and bonds dearly wish they did not own them and in fact are shedding them at rapid clip. (6) We know on the streets of foreign nations, vendors prefer currencies other than the dollar. (7) We know nations like Canada, Australia and Switzerland are struggling to prevent their own currencies from becoming too expensive as the US Dollar (opposite trade) sinks and drives theirs higher. We could go on and on but you get the picture.

We say a lot of this stuff is inevitable but some of it may never happen. However, just as in the FDR’s 1930’s, governments make the same mistakes over-and-over again. We think Greater Depression II lasts from 2009 until the next world war. Some tell us it ends in 2017. War is sadly the ultimate economic weapon to find depression exit relief. This, we would not wish on any one. Read American and world history from 1776 to the present. This is what we get; all over again.

Financials crashed in fall 2008 with Lehman. Recovery began with TARP in May, 2009: During October, 2009 we’re ending a dead cat bounce with a selling event later this month. Precious metals and their shares are toppy on this October 8, 2009, for the shorter term. Beginning October 31 most all trends can reverse and moves to rallies.

Keep in mind, if you own paid for stuff it will most likely remain in your hands; not in somebody else’s. That includes gold and silver. Do not get tangled-up in daily noise. Keep studying the larger view and buy precious metals after each profit-taking correction. Headwinds are building into an economic hurricane. Take care of business right now. My dire fall prediction might surprise us and arrive a little later. Selling is now. But next summer could be the larger crash. Time is short.

Personally, I can see unbelievable opportunities to trade that we would never see again for many years. Turn these problems into opportunities. Those on the right side of the trade might get rich. Those on the other side are just victims. Stay Alert. – Traderrog

Roger Wiegand
Editor Trader Tracks Newsletter
The Jay & Rog Blog at webeatthestreet.com

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Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional stock shares, futures and commodities trading with specifics for individual trades. See webeatthestreet.com for more information.

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