Another chance for gold to
shine part 1
Clif Droke
Mar 7, 2005
After a ho-hum week of
trading last week, the price of gold closed the first week of
March at $433.60 While slightly below last week's close, gold
is back above its 20-week moving average and is about to meet
up with a rising wave of supply that should be able to carry
it back up toward the $445-$450 area before encountering strong
resistance.
This is good news for gold bulls as it will allow gold another
test of that pivotal high from earlier December before the 10-week
correction began. This is coming at a time when many major commodities
are experiencing parabolic-type blow-off moves to the upside
as the winds of inflation are stirring once again after a brief
hiatus.
The latest news headlines reveal much concern over the rising
specter of inflation, including a feature-length article in a
recent edition of Business Week entitled "Is that a whiff
of inflation?" In a rather dark tone, the editors state
in this article, "The forces that have held it back are
starting to move in another direction."
Another recent article appearing in the London Financial Times
asserts, "Inflation measure signals revival of price pressures."
This article expounds at length the fact that the Federal Reserve's
favorite measure of inflation has recently rekindled fears that
price pressures may have intensified at the start of the year.
Naturally, this is ex post facto (considering that the aforementioned
"measure" is only viewing what occurred earlier in
2004).
But the re-emergence of inflation concern in the major news headlines
is worth noting. This is especially true since most mainstream
publications have gone out of their way to paint a rosy picture
at the beginning of this year, complete with some of the most
ebullient economic headlines since the late 1990s. Why the sudden
about-face? This discussion will have to await another commentary.
For now suffice it to say that the perception, if not a measure
of reality, is that "inflation is back" right now.
And for that we have only to turn to the primary barometer of
inflation pressure, viz., the price of gold.
 Now as you can see in the daily chart of spot gold,
the yellow metal is back above its 10-week, 20-week, and 30-week
moving averages. The upward curve of the parabolic bowl structure
in this chart reflects the increasing rate of change in momentum,
which is what should give rise to the re-test of the $445-$450
area in the immediate-term.
A concern,
however, is that the 10-week MA is still downward-tilting, which
suggests that a battle with resistance lies ahead as gold moves
above $440 and closer to the $445-$450 target area. Also of concern
is the fact that gold's 10-week correction bottom at $410 was
to the right-of-center of the mid-point, or "vertex,"
of the parabolic bowl. This again could mean that the parabola
will "expire" once gold reaches the target area. We'll
know more as the target is reached.
--Clif Droke
Publishing Concepts
website: http://www.clifdroke.com/
email: clif@clifdroke.com
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Clif Droke
is the editor of several subscription services including:
1) The Gold
Strategies Review,
a monthly forecast & analysis of gold and silver futures
and precious metals stocks. Published online. $200/yr.
2) The Durban
Roodepoort Deep (a.k.a. The DROOY Report) for traders,
published online every trading day.
Aimed at
serious day and short-term traders of Durban Deep and followers
of the XAU & HUI index. DROOY Subscribers are billed monthly
$50/month.
Two
week 'trial' subscriptions now available $25, here.
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