Gold - Major Breakout Imminent

Brian Bloom
Jun 21, 2007

The monthly chart of the 30 Year Bond Yield below (courtesy decisionpoint.com) provides stark evidence that the capacity of Central Bankers to influence the direction of the markets is now waning.

In light of this waning capability, and despite their predisposition to prevent the gold price from reaching new highs, the longer term technical evidence is suggesting that upside pressures are building at a deeper level within the gold and related markets. 
 
The rising trendline on the weekly $XAU chart below (courtesy Bigcharts.com) has ten points of contact. It is therefore highly significant.

From the high point of 171.71 in the week May 7th 2006, three descending fan lines can be drawn in. Slowly, but surely, the price has been trending towards the apex of a triangle which has been in the making for over a year.
 
Will it break up or down? That the most likely direction of the break will be UP, flows from the following analysis (notwithstanding short term uncertainty in the gold markets):
 
*************
 
As at June 20th, the buy signal on the following 3% X 3 box reversal chart - which manifested on February 23rd 2007, remains intact. (Courtesy www.stockcharts.com)
 
The target for gold - based on the horizontal count technique - is $750 an ounce (short term) and $1,400 an ounce (longer term)

The weekly goldollar index chart (derived by multiplying the gold price by the US$ Index) is still climbing its rising trendline - with the context of a US$ Index that appears to have bottomed (chart courtesy decisonpoint.com)

If the gold price breaks up in context of a US Dollar which does not break down, then the gold price will finally break free of the spurious shackles that it is an alternate currency to the United States Dollar. Gold is not now, never was and never will be a "currency" in the strict meaning of the word. Yes, Gold is a store of value. Yes, Gold may one day again be a medium of exchange for Balance Sheet (as opposed to P&L) transaction purposes. Above all, gold is a commodity. In context of some in-depth research I did for the recently completed manuscript of my novel, Beyond Neanderthal (see www.beyondneanderthal.com), I am able to argue fairly convincingly that gold is almost priceless in its value to humanity. I am also able to argue that gold became the world's preferred medium of exchange precisely because it has this inherent value.
 
Coming back down to Earth:
 
A 'straw in the wind' is the non confirmation on the daily $XAU chart, which shows falling bottoms on the price chart and rising bottoms on the PMO chart over the past three weeks.

Note also how the distance between 20,50 and 200 MA's on the price chart have been flattening out relative to one another as the indecision period draws to a close and as the coiled spring winds ever tighter. (Of course, the price could break down, but the longer term evidence suggests that the break will be to the upside)
 
The reverse head and shoulders formation is clear to see on the Commodities chart below, and this will be confirmed if the price breaks decisively above the neckline - which it tried to do a couple of days ago. Should a breakout manifest, a target level of 340 to 350 seems likely. If gold is indeed a commodity, it will break up to follow the other commodities.

The 3% X 3 Box reversal chart of the $XAU below shows a significant consolidation and, should the price break up, a target (based on horizontal count technique) of 180 and a target (based on vertical count technique) of 200 may be anticipated i.e. a 28% to 42% rise may be expected  from these levels.

Summary
 
Gold share prices have been consolidating since May 2006. They are now approaching the apex of a triangle in context of a bullish non-confirmation between the price chart and the oscillator chart.
 
Against the background of  a clear buy signal which is still intact on the P&F chart of the gold price, and a Commodities Index chart on which a Head and Shoulders reversal pattern seems to have been building, the probabilities favour an upside break of the $XAU.
 
Should this break manifest - increasingly probable over the next few weeks - the up-move in the $XAU is likely to be explosive; around 28% - 42% move before the move is exhausted.
 
This move will likely occur within the context of a measured move target for the gold price itself to $750 an ounce in the short term, and $1,400 an ounce in the longer term.

Jun 19, 2007
Brian Bloom
website: www.beyondneanderthal.com
email: info@beyondneanderthal.com
Australia
 
Since 1987, when Brian Bloom became involved in the Venture Capital Industry, he has been constantly on the lookout for alternative energy technologies to replace fossil fuels. He has recently completed the manuscript of a novel entitled Beyond Neanderthal which he is targeting to publish within six to nine months.

The novel has been drafted on three levels: As a vehicle for communication it tells the light hearted, romantic story of four heroes in search of alternative energy technologies which can fully replace Neanderthal Fire. On that level, its storyline and language have been crafted to be understood and enjoyed by everyone with a high school education.  The second level of the novel explores the intricacies of the processes involved and stimulates thinking about their development. None of the three new energy technologies which it introduces is yet on commercial radar. Gold, the element, (Au) will power one of them. On the third level, it examines why these technologies have not yet been commercialised. The answer: We've got our priorities wrong.

Beyond Neanderthal also provides a roughly quantified strategic plan to commercialise at least two of these technologies within a decade - across the planet.  In context of our incorrect priorities, this cannot be achieved by Private Enterprise. Tragically, Governments will not act unless there is pressure from voters. It is therefore necessary to generate a juggernaut tidal wave of that pressure. The cost will be 'peppercorn' relative to what is being currently considered by some Governments. Together, these three technologies have the power to lift humanity to a new level of evolution. Within a decade, Carbon emissions will plummet but, as you will discover, they are an irrelevancy. Please register your interest to acquire a copy of this novel at www.beyondneanderthal.com . Please also inform all your friends and associates. The more people who read the novel, the greater will be the pressure for Governments to act.

321gold Ltd