my case for gold and why i'm bullish

Allow me state my case for being bullish gold and why I can see $1000 in the very short term (1-2 weeks):

Fundamentals: There is nothing (that I am aware of) that historically speaking, is more bullish for gold than 0% interest rates and the new slang for printing money 'Quantitative Easing'. Correct me if I am wrong, but barring an announcement stating an instant devaluation of a currency against gold, I can't find anything. My personal feel is that attention is 'purposely' being diverted from this with Ex-NY *Fed* chief Timmy (note whats inside the asterisks) with his wonderful, all-conquering, world-saving plan.

We are in stage 2 of gold's bull market. Typical signs of stage 2 are accumulation by institutional money and climbing the 'wall of worry'. Well we've certainly had (and still have) the wall of worry. Every time gold rises everyones scared that its going to drop back down again, due to past emotional scars.

In regards to institutional investment, think Paulson (not the ex treasury crook) taking an 11% stake (is that right?) in Anglogold, talk of high net worth individuals buying physical, capital raisings for Gold Miners going on like wildfire (NCM, LGL, IGR, RMS, geez even Catalpah managed to get 60million from MacBank) and plenty of institutional money moving into GLD in the US and other ETF's the world over. Its hard to deny the above, as it is happening all around us.

Personally I feel the fundamentals point VERY FIRMLY in one direction: Bullish


Technicals: First, allow me to use GLD as a proxy for the USD gold price. One advantage this has is volume to help with analysis. GLD is worth 1/10 of an ounce I believe.

First chart is 1 year chart

Classic double bottom formed in Oct & Nov last year, yellow arrow points to bar that confirmed the reversal pattern.

Trendline is up and has been respected 3 times with a subsequent move above the most recent peak making it a valid trendline. It was of course violated, but the reversal back up through it negated the near term danger. I also view that move as highly suspicious, especially with it being just hours before QE was announced (to all of us who aren't in the priviledged enough to recieve inside information). I will bet you stops were deliberately triggered, but thats for another time.

White lines all indicate support/resisitance. Note last wednesday came back to touch support which was previous resistance twice back in late 08, early 09. The other two white lines form the band of resistance turned support that exists from the spike when the financial system almost collapsed back in Sept/Oct 08. That is now acting as support for current price action.

Also note the volume confirmation indicated by the white arrows on price and volume. Increasing volume on the rise, decreasing on the pullback. This is classic volume confirmation of the bullish move




Second chart is 6 month chart

All three white arrows point to the last three Key Reversals that have occured.

You can see that over the last 4 days, volume has also given some strong indications of direction. It had one of its largest volume days ever on the news of QE. That alone should start bells ringing. That was followed by another reasonably strong volume day, accompanied by another up day in price. We then have two low volume days on an inside price day and a down day. Again, volume is confirming the bullish move.

Also worth mentioning, although I haven't marked it on the chart is that the three lower lows made in march, one after the other were not confimred by the RSI. It made three higher lows, giving rise to a bullish divergence in the RSI

The trend of higher highs and higher lows is still very much intact. Price is coming into the support levels provided by the highs last Oct. It is my belief that either that support level will hold or at worst price will resume upwards when it meets the trendline as indicated by the yellow arrow, firstly moving past the $950 level, closely followed by another attack on the $1000 level. I honestly do believe this could occur in the space of a few short days.

It seems quite inconcievable to me how anyone could say the chart looks bearish and gold is heading down. A trend should always be assumed to be in place until there is evidence to the contrary. There is no evidence to the contrary on the charts, yet there is plenty of evidence that the technicals point in the same direction as the fundamentals: Bullish





Both forms of analysis point in the same direction to me. Finally as extra confirmation, remember the bit I wrote about the gold shares as a group last week and all the charts I did. Most were in continuation patterns and a number had broken out on volume. Another couple have also broken out since I posted that. I'm sure they say shares lead the metal.......

There is a LOT of false information out there and a lot of throwaway one liners trying to convince you that golds going to crash. Don't get me wrong...it just might....all the analysis in the world can be wrong at times, but if you look at the facts and the charts, all the information points to gold being bullish in the short, medium and long term.

So am I alone or do you see what I see.....?