Gold continues consolidation
(is another take-off possible in Q4?)
Clif Droke
GSR snippet
May 4, 2005
Below is
an extract from Clif Droke's Gold Strategies Review for May 2005
Gold and the U.S. dollar index
have established near-term trading ranges as we've discussed
in previous newsletters. As discussed last time, this will afford
traders the opportunity of making profitable short-term trades
off the support and resistance parameters of the range, but as
far as sustained intermediate-term moves we'll likely have our
patience tested until later in the year when the dominant trends
for both the dollar and gold should re-emerge.
But while the near-term outlook
could continue to see gold trade between the $415-$420 and $445-$450
trading range band, what about later this year closer to the
fourth quarter? Is it possible gold could be gearing up for another
run to a higher high heading into 2006? Could another sustained
leg of the bull market be underway by late in the year?
In last month's letter I wrote,
"I believe we'll quite possibly get a major rally opportunity
in gold closer to the fall of this year when 6-year cycle for
equities peaks and exerts significant downside pressure on the
stock market. In turn, this could have a positive lifting effect
on gold as money flows to the perceived 'safety havens' of the
financial realm, most notably of course the yellow metal."
Portfolio manager Van Harissis
of Champlain Investment Partners in Burlington, Vt., was recently
quoted on Barron's as stating that a fall decline in equities
(which I also share for the reason mentioned above) could result
in the gold price soaring to $650, "rendering the precious
metal an equally precious refuge in uncertain times." While
I don't share his super-bullish on gold outlook for the coming
months (I believe $650 between now and year-end is an excessively
optimistic outlook), I do agree that a late summer/early fall
decline in stocks could in fact render the yellow metal more
valuable than it is now.
One litmus test for gold will
be as we head into the month of June. This is when the Kress
120-week cycle is due to bottom hard and it will be very interesting
to see how gold reacts in the face of this falling pressure on
equities in June. This will give us at least some idea of what
to expect later in the year when the 6-year cycle is due to peak.
The above daily chart shows
the price of gold relative to its dominant short-term moving
averages of 30-days, 60-days, and 90-days. As you can clearly
see the 30-day and 90-day moving averages have gone flat, which
is suggestive of a continuation of the near-term trading range
we've been alluding to in past letters. There's a slight downward
slope to the 60-day MA which could mean a revisitation of the
trading range floor near $420 in early May. But aside from this
there should be strong support beginning near $420. We'll be
publishing GSR updates each weekend this month so we'll review
the ongoing gold and dollar pivotal turning points on a rolling
basis in May.
More follows for subscribers,
including the analysis of over 3 dozen gold stocks. You can subscribe
to the Gold Strategies Review ($21) here.
--Clif Droke
clif@clifdroke.com
website, www.clifdroke.com
321gold Inc
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