Tracking the gold price.

This is the time to examine the behavior of the gold price. Larry's forecast calls for a fall in the DOW to 9,000 and the PMs to crash right along with it. Since, we saw a movement in the DOW to below 11,000 and the serious drop in the PMs, do we accept Larry's analysis or, is there an alternate explanation, i.e. an alternate forecast?

The first graph shows gold price plotted on a semi log scale along with the 30 DMA and the 200 DMA. The graph is very similar to the graph of GLD in the previous post. In fact, I chose the 30 DMA to show that the correction bottoms fall on the 30 DMA.

In the next graph, I used the 50 DMA and labeled the rallies. There were 7 of these. A couple of features are worth mentioning: 1. the 50 DMA and 200 DMA were converging up to rally #3 and then began to diverge, so that the 50 DMA began to run faster that the 200 DMA. This indicated a rising price in gold; 2. Another inflection point occurred in the last peak (rally #7), which indicates that gold prices will now accelerate. Note that peak #2 was short and peak #3 was almost 6 months in duration, therefore, we expect now a long period of rising gold prices. Note also that when the MACD rolls over to a negative number, it indicates the beginning of rising prices. That is, the MACD may remain negative even when gold prices already are rising.

Peak #7 (or rally #7) is of particular interest. First, it was larger than the other peaks and was followed by a .6 Fibonacci retracement. Also, the bottom of the replacement was intraday (about $100) and the downward move successfully tested the 50 DMA.

The first two graphs are semi log, showing gold price on a logarithmic scale. This tends to reduce changes toward the higher numbers, so I replotted gold prices on an ordinary numbers scale. This does not change the conclusions, but lets us see some trends more clearly. For example, the inflections during peak #3 (when the 50 DMA began to accelerate away from the 200 DMA) shows up better and so does the inflection point in peak #7. If this trading pattern holds, peak #8 should be even bigger than peak #7 and take gold prices past 2,000.

Could Larry be right that PMs will crash along with the stocks? Sure. As YB said 'it is hard to predict things, especially the future.' However, Larry had already missed the Summer rally and he said that if gold hits 2,100, he will go in. The next two weeks should be interesting.