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CHARTWORKS - Jul 16, 2011
Another Golden Triangle

Technical observations of

Bob Hoye
Institutional Advisors
Posted Jul 20, 2011

Written Jul 16, 2011

We recently mentioned targets of $1635 and $1670 for gold. These are based upon the depth of the triangular consolidation from May 2nd. The kiss of the lower 50 and 55-day Bollinger Bands and the generation of Springboard buy alerts (blue crosses on the chart) two weeks ago indicated that the market was ready to attempt a upside breakout.

Over the years, breakouts of triangles and wedges in gold have provided an excellent means of measurement for interim rallies. The minimum target ($1635) is based upon the depth of the most recent correction prior to the breakout. The optimum target ($1670) is based upon the depth of the entire consolidation and the extended target ($1750) is 161.8% of the entire consolidation. Corrections on the way to $1635 should be limited to (1) the previous high close of $1563 (2) the 20-day exponential moving average (3) a 25 point decline in the RSI(9).

The twenty-seven year consolidation in gold under $730 continues to serve as one of our most important charts. Such multi-year patterns were present in the Dow (1966-82), Silver (1968-74), Gold (1974-78), Copper (1980 to 2004), Crude Oil (1980 to 2004), Wheat (1972 to 2007) and Cotton (1983 to 2010). In each case the successful breakout was followed by a rally that reached three times the height of the base. In the case of gold this offers a target of $2155. The only point of significance between here and that level is $1680 (two times the height).

We see nothing to concern us regarding the commitment of traders or public opinion.

On a deflated basis, using the BLS CPI, the $2000 level is the next longer term area of resistance. It is the equivalent of $730 in October 1980.

When gold is measured using the pre-Clinton CPI as maintained by John Williams at Shadow Government Statistics ( it is obvious that there is plenty of room left on the upside.


Jul 16, 2011
Institutional Advisors

Hoye Archives

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