Just a Small Thrust Needed in Gold

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"Higher prices seem very likely, but we will probably not see them until the bear rally...flames out."

Although it wouldn't take much to turn June Gold's daily chart robustly bullish, the futures continue to tease and titillate without delivering the goods. They are obviously marking time, too feisty to be knocked to the ground but not yet ready for the inevitable assault on $1,000. The Comex June contract was inching toward a $905.00 rally target, evidently lacking the power to reach a more ambitious target at $914.50 that would have turned the hourly chart unambiguously bullish. Alas, the rally died at $904.00, a dollar beneath our target, sending the futures into a $10 dive that was all too typical of recent price action.

So what, exactly, would it take to turn June Gold into a screaming buy? Very simply, a rally that traverses the gap between $919.70 and $935.80 without taking a breather lasting more than a day. According to our technical rules, that would create a bullish impulse leg of daily-chart degree, effectively clinching a follow-through to at least $967.30. Moreover, that last number is a "midpoint" Hidden Pivot, and if it were to be breached on a closing basis for two consecutive days, a further surge to at least $1,069.60 would become an odds-on bet.

This sequence of events is, of course, speculative at this point, and we needn't get excited about it until such time as the June contract musters a similar feat on the lesser charts, surpassing the $914.50 benchmark noted above. Meanwhile, and interestingly, May Silver's daily chart is slightly more bullish than Gold's. We cannot say whether this means silver is likely to outperform gold during the next bull cycle, but it is reassuring on the question of bullionís eventual direction. Higher prices seem very likely, but we will probably not see them until the bear rally that has impelled stocks higher since early March flames out.

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