To 321gold home page

Home   Links   Editorials

Gold - Technical Update

Technical observations of

Bob Hoye
Institutional Advisors
Jun 1, 2006

Gold managed to achieve an RSI(14) reading of 44.73 at last week's low. This satisfies the "mid 40s" target we established on May 16th and we are now getting a reasonable rally. However, it is likely to undergo another test of support before a sustainable rally is possible.

Gold should have difficulty at $672 to $680 on the current rally. This would be expected to coincide with the CCI(8) reading getting above zero (currently -40). From there we'd like to see a rolling top with a decline into the June 6 th to 13th time window. Two scenarios can then develop:

1. If the low close of the next two weeks holds above $653 then we can look forward to a move to new highs in July.

2. If $653 is violated then we can look forward to a deeper correction, taking out the $632 low of May 24 th.

As outlined on May 16th, once this second declining phase is under way then a "close above the previous six days' closes will signal that the consolidation has run its course."

The worst case scenario for gold would involve a 50% correction of the rally from last year's low of $410 ($570). Gold has a reliable history of creating spike lows at 50% retracement points. Using a weekly RSI(14) reading to identify deep corrections to use as starting points, the following fifteen dates offered excellent buys; 08/17/73, 07/05/74, 01/10/75, 04/28/78, 03/21/80, 11/07/80, 10/08/82, 11/28/86, 02/12/88, 09/03/93, 04/22/94, 10/26/01, 03/21/03, 04/30/04 & 02/04/05.

Due to the overall weakness in the global equity markets, it is likely that bullion will outperform the mining stocks in the early stage of the resumption of gold's bull market.

-Bob Hoye
Institutional Advisors

CHARTWORKS - May 30, 2006

Hoye Archives

The opinions in this report are solely those of the author. The information herein was obtained from various sources; however we do not guarantee its accuracy or completeness. This research report is prepared for general circulation and is circulated for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized.

Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Neither the information nor any opinion expressed constitutes an offer to buy or sell any securities or options or futures contracts. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investment mentioned in this report. In addition, investors in securities such as ADRs, whose values are influenced by the currency of the underlying security, effectively assume currency risk. Moreover, from time to time, members of the Institutional Advisors team may be long or short positions discussed in our publications.

321gold Inc