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Wednesday, August 22, 2012
Are gold cycles turning up with easy money?

Aug. 21, 2012, 3:39 p.m. EDT

Are gold cycles turning up with easy money?

About Mike Paulenoff
Mike Paulenoff is author of, a live trading diary of his technical sector analysis and trade alerts on stocks and ETFs best poised to capitalize on sector trends. Mike is a 30-plus year Wall Street veteran, previously at Smith Barney, Harris Upham, Drexel Burnham Lambert, and Republic National Bank. Co-author of The Business-One Irwin Guide to the Futures Markets (with Stanley Kroll), he publishes widely on sites such as MarketWatch, WSJ Online, and Minyanville, where he is a contributing "professor."

By Mike Paulenoff

My cycle work in gold indicates we're due for a few months of strong upside action.

Using cycles based on 5.5 months, gold was due for a low between June 11 and 15 after its December 29 low at $1522.48.

The two lowest-lows in and around the anticipated cycle low window occurred on May 16 at $1526.98, followed by a successful retest on June 28 at $1547.87. Every bout of subsequent weakness has held above the May-June lows, suggesting that, indeed, a 5.5 month cycle low has been established, presumably ahead of two months of bullish price action.

Today, spot gold has broken above key, 10-week resistance at $1625, and has continued higher quickly towards more important resistance at $1640.30, the June 6 high, the first signal that a new up-leg is in progress. The next immediate challenge is a test of the September 2011 to August 2012 down trendline, now at $1672, a break of which should trigger upside continuation to $1680-$1700, thereafter.

At this juncture, only a failure to hurdle $1640.30, followed by a decline that breaks back beneath $1625, will indicate that spot gold has disappointed and trapped the bulls, yet again this summer.

Barring such a bull trap, my intermediate-term pattern and cycle work will be arguing strongly that spot gold has entered a new bull phase that should revisit the September 2011 high at $1921.05.

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All of the provided information is believed to be accurate, however errors are possible. The opinions in the Commentary section do not necessarily reflect the opinions of Past performance of any investment is no guarantee of future performance. All investments have risk.
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