A Monthly View of Gold Prices

Oct 26, 2008: 1:46 PM CST

With gold price movement confusing many traders, let’s pull the chart back to the monthly view to see if we can gain any insight from this higher time frame and note possible significant support under us.

Gold Monthly Chart (normal scale):

These charts are similar, so I’ll show them both and then discuss them.  I often prefer to use the arithmetic scale as it often clarifies the most recent data (assuming that data is to the top of the chart) while compressing past data (assuming that it is to the lower prices in the past on the chart) – my feeling is that current price data is more important to view than past data (in terms of clarity).  All that’s open to debate so I’ll show both charts.

Price is testing the rising 50 month EMA and has actually found temporary support at this level ($670 per ounce) and we could be about to see, or are currently seeing, a short-term run back to test a couple of higher levels.

Ultimately, despite the technical (chart) damage on the daily and now weekly charts (timeframes), monthly gold is still in a defined and confirmed uptrend, and is only pulling back to test the 50 EMA along with the (approximate) 38.2% long-scale Fibonacci retracement.

In addition, price formed a new momentum high in early 2008, but the momentum line (black) has now crossed beneath the zero line (of the MACD) which tempers the bullishness.

Let’s pull the view back and see the log-scale chart for a moment.

Gold Monthly Chart (logarithmic/percentage equivalent scale):

In terms of Elliott Wave (thanks to clarity from the log-scale), one could argue that Wave 1 lasted from 2001 until early 2004 with Wave 2 being an ABC ‘flat’ correction, giving rise to the almost vertical Wave 3 from late 2005 to early 2006, and seeing another “flat” ABC Correction for Wave 4 that ended in mid-2007 which gave way to the Final Wave 5 impulse into the $1,000 per ounce price highs that formed significant ‘topping’ price patterns and violations of key moving averages (and Fibonacci support) on the daily and (now) weekly frames.

As such, we’re seeing perhaps Wave A down (which may have been a roughly 5-wave impulse pattern down itself) and could be expecting a B wave yet to come (soon) which should take price up to $900 or so (rough estimation).

Either way, if some of the lower time frame charts seem confusing (the same thought goes for stocks), then pull the view back to the monthly charts for better clarity.

Always remember that the shorter time frames LEAD the longer time frames, and chart destruction on the shorter time frames will precede destruction on higher time frames (by destruction, I mean downside violations of support zones, moving averages, lower highs/lows, Fibonacci retracements, etc).

Be safe out there.


5 Responses to “A Monthly View of Gold Prices”

  1. Richard Says:

    In the linked article, I mention currency traders sold the yen carry trade, EUR/JPY, short, causing a massive a massive disinvestment from eastern european, GUR, emerging markets, EEM, the BRICS, EEB, and world shares, EFA.

    Financial and real estate values fell on exposure to sythetic CDOs and settlement of Lehman Brothers credit default swaps

    Currency losses for the week were significant.

    while the US Dollar was strong, and brokerage accounts and money markets insured, there seems to me to be a risk of investment loss due to a seizure that could take place in either the lending market place or the stock market.

    If one has wealth, it is best to put it far, far away from the current financial system, safe and sound in a guarded vault, like BullionVault and GoldMoney, with an account personally at streetTracks Gold Trust, and in physical possession of gold coins.

  2. Tom Says:

    Not about gold but a great post here. http://www.safehaven.com/article-11665.htm

  3. Brad Says:

    Great analysis of future gold price. I have posted this article in my blog.


  4. Lisa Says:

    Gold prices fall more than 2% in international markets on Friday, and it was heading for one of its biggest monthly drop in more than 30 years due to the recession. It might but turn into an investment opportunity. Buy and hold much when you can in the lower price, and hit the market when the graph touches the zenith, even an average zenith would be an opportunity.

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