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Gold is at upper support - watch it carefully

Commentaries & Views

In my last public article on gold, I outlined my expectations for a rally to the $2,428. And, as I write this article now, gold is finally giving us the pullback I wanted to see to set up the rally towards that target.

Now, I have been doing this publicly for 12 years now. And, during that time, we have called major tops and bottoms in the metals market, including calling the high of 2011 within $6 of the actual high struck, as well as the exact bottom in gold at the end of 2015. In fact, even before we struck the high that we were calling for in 2011, I outlined my expectation for the potential that we can drop from that 2011 high down towards the $1,000 region.

Moreover, I have also outlined through the years that my analysis is based upon market sentiment rather than the fundamentals upon which most of the market focuses. Yet, these same fundamentals have caused most market participants to remain quite bullish at the highs and quite bearish at the lows. However, many still view me as being a bit "nutty,” as these are just some of the comments I have received over the years from readers who have disagreed with my perspectives:

"With all due respect Avi, you plainly do NOT understand the gold market."

"Your TA is useless. You don't understand the fundamentals because you only look to the past. Gold bulls are forward thinking. The times they are a changing..."

"The problem is that TA is like driving a car by only looking in the rear view mirror... There is no foresight involved; it's all based on past performance. The future of the fundamentals is what you fail to grasp."

"There is no way you can understand what is going on in gold by doing technical analysis. Gold is driven by fundamentals."

"Technical analyses is all well and good, but you cannot apply it to the PM sector which has been artificially manipulated and suppressed for years."

What is most interesting is that these comments were posted when I was calling for a major turn in the market and their "fundamental” bias had them looking the wrong way.

And, for those that still believe the metals market is manipulated, I am again going to direct you to an article I wrote a number of years ago addressing the specifics of these arguments:

In the meantime, I think anyone that has followed us in the metals market knows that our record has been second to none in outlining the turning points and the targets for the complex. Yet, none of our analysis is based upon fundamentals or manipulation. And, it has served us extraordinarily well.

So, we are now at an important juncture over the coming several weeks. While I still maintain an expectation that we can rally towards my ideal target outlined above, how the market takes shape in the next two weeks will likely tell us if we break out on our way to that target sooner rather than later.

Before I move into the specific analysis, for those interested in the background material as to how our analysis methodology works, you can feel free to read this 6-part series I wrote several years ago:

Moving into the analysis, as I noted, the next few weeks are important. Smaller degree support right now for gold is in the $1,845/50 region (GC April contract). As long as that support holds, I am expecting a rally over the coming weeks. Should that rally take shape as an 5-wave structure, which adheres to our Fibonacci Pinball structure, then we will have to prepare for a break out in gold over the coming month, which will next point us north of $2,100SPX and quite rapidly.

However, if the next rally is corrective in nature or if we see a sustained break of $1845/50 support, then it opens the door to the potential that this pullback/consolidation will take us several more weeks, and can potentially take us down to test the $1735/1,780 region.

So, I would be watching the $1,845/50 support very closely in the coming days, as well as the structure of any rally. That will give us a very strong indication as to when gold intends to break out next to the $2,100 region, as we look towards the $2,428 target in the coming year or two.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.