To 321gold home page

Home   Links   Editorials


Technical observations of

Bob Hoye
Institutional Advisors
Jun 26 , 2009

The fifteen month consolidation phase that Gold prices have been travelling through continues to mimic those of 1994, 2002 and 2007. The next event in 'the pattern' should be a test of $990.

This week's low of $913 has retraced 59% of the rally from the April lows (in line with the 49% in '94 & 60% in '02). Prices have also declined to test the lower Bollinger Band in gold and the senior indices (XAU, HUI, GDX & XGD.TO). June 17th produced a daily Sequential buy setup that has been common around interim lows and the time frame for yesterday's low matches that of the patterns the market is following.

(Click on images to enlarge)

click to enlarge

Once prices turn higher we will need to watch the rally very closely. We are approaching the point where the comparative patterns diverge. In 2002 and 2007 the stocks rallied in sync with the bullion, taking out analogous resistance levels and bullion went on to stage major advances.

  • In 2002 gold rallied 23% from the low (point 8) within a period of two months.
  • In 2007 gold was 58% higher within seven months.

However, in 1994, as gold rallied to a multi-month high (06/21/94), the stocks failed to surpass resistance with the result being that bullion and stocks remained in a broad trading range for another year. To confirm a lasting breakout above $990 we will want to see the related stock indices (XAU, HUI & GDM) close above their May highs.

Similar consolidation patterns

click to enlarge

Rarely do all the pieces in analysis line up on one side. The speculative and commercial positions in Comex futures remain high, down only 14,000 and 18,000 respectively, as of the CFTC report on June 19th. If there had been a reduction of 40,000 or more contracts in the speculative position, thereby putting enough bulls back on the sidelines, it would have provided additional buying force to punch through the highs once sentiment turns more positive. Typically a reduction in the positions of this magnitude will allow for rallies of $20 to $25.

click to enlarge

June 24, 2009
Institutional Advisors

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 Ltd