Running with the bulls…
‘Good time to be a gold bug! Let the good times roll!’
That’s the message I received from — of all people — a financial planner friend of mine with an interest in hard money principles.
The big question is: What’s next?
Is the yellow metal staying put at US$1,450…moving higher…or, worse, falling lower? (This would sink the hopes of gold bugs around the world, no doubt.)
Well, according to one trader, gold bugs may have a very exciting 12 months ahead.
Gold busts higher
I have said before that a straight line up makes me nervous.
So when gold rose US$50 per ounce, I was rooting for a small selloff.
And the gold price trading in early July has been good.
On Tuesday, I saw a ‘rising triangle’ pattern was forming.
As I explained here, a rising triangle is simply price consolidation.
The price range of an asset gets narrower and narrower each day…eventually leading to a breakout. That is, the asset busts out of the price range it was stuck in.
And look what we were given this morning…
US dollar gold price – daily chart
Source: Goldprice.org; Trading View
On Wednesday night, the gold price teased us by dancing with the resistance line…and this morning I work up to a gold price of US$1,448.
What does this mean for gold investors and gold bugs alike?
For starters, the action in the gold price over the past couple of weeks is a good thing.
It suggests that gold is going to move higher rather than fall. Plus, the pattern often ends up acting as ‘support’ in the long term.
In a bull market, a triangle gives the asset price somewhere to fall back to, and traders then know that this is a key psychological point for the market.
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Plus, it signals to us that gold is readying itself to tackle US$1,500, sooner rather than later.
And I’m not the only one who thinks this is possible…
Walking the walk
One thing that impresses me is people who back their view. It’s one thing to tell the market something, but it’s an entirely different thing to announce that you are following your own suggestions.
People have often asked me if my bullishness on gold is just a front. Something I do because the Agora network (the parent company of The Daily Reckoning Australia) believes in sound money.
That’s not simply not the case.
Not only do I have some gold bullion, I’m also taking advantage of the increasing gap in the gold to silver ratio. In addition, I’m slowly acquiring a bunch of precious metals to set aside for my kids.
My point is, talking about gold isn’t just about making some coin once a fortnight. It’s a genuine investment strategy I follow.
And I stumbled across a trader who confidently backed his own view…on air.
On Wednesday night, Kitco News interviewed a trader called Todd Gordon, the founder of TradingAnalysis.com.
Gordon explained to the host that he, too, has noticed the US dollar gold price consolidation I wrote about earlier in the week.
After explaining how he uses the Elliott Wave for technical analysis (the Elliott Wave is a technical analysis method that looks for cycles to define highs and lows in an asset price, and incorporates trader psychology), Gordon said gold was ready to bust out higher.
Then, out of the blue, he said, ‘We have a pretty good setup for gold to move to US$1,440-50. I want to put my trade on live.’
Thirty seconds later, he had a live trade on for gold to rally.
Within 24 hours, the US dollar gold price jumped to exactly where Gordon said it would…
Get ready for US$1,700
Now here’s the crazy talk.
We could be seeing the US dollar gold price rally US$252 in the next six to 12 months. That’s a potential 20% rally in the physical metal, and gives us a gold price of U$1,700.
The way Gordon sees it, the big picture for gold is going to push the yellow metal higher…and quickly.
This means you should ready yourself for some big price swings in the yellow metal.
Oh, and get ready for a bunch of smug gold bugs as the price leaps.
Until next time,