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The next rally phase in gold can be anticipated to produce major excitement and push technical oscillators into overbought territory for extended periods of time. Upper price targets are the (deflated) highs of 1993 and then 1987. These are labeled points 12 and 14 and due within the next two to three years. Point 12 is equal to a nominal price of $650 and is a likely target for next year. Point 14 should provide a formidable resistance. Interestingly, it will be in the $900 to $950 range in 2007, marginally above the high seen in 1980. Eventually the price activity will deviate from this model. For now we will view any pullback that holds around $470 as maintaining the integrity of the rally. |
GOLD SHARES
Our gold/commodities index (GCI) set a cyclical high of 255 in June, 2003 and ended its cyclical bear at 185 in June, 2005.
It is in a solid uptrend, which we have labeled as a cyclical bull market that could run into mid- 2007 and make a 50% gain.
On the first cyclical bull market from October, 2000, our gold/commodities index gained 35% from 189 to 255. With that, the HUI soared 600% to 252 in December, 2003.
Obviously, a 50% gain for the GCI would accomplish a huge bull market for the stocks.
The depth of the last two years consolidation was more pronounced in the XAU and HUI mining indices, but has now been followed by a breakout of the major resistance lines. Look for resistance in the XAU at 150 and then 200.
The Battle at $500
On a shorter term basis the battle at the psychological $500 level is similar to those seen at previous 00's. We should see a punch through here (ideally to $525+) followed by a correction of three to eight weeks. The correction will likely produce a decline in the RSI(14) of 35 to 40 points and provide the next lower risk entry point.
Bob Hoye
Institutional Advisors
E-mail bobhoye@institutionaladvisors.com
Website: www.institutionaladvisors.com
CHARTWORKS - DECEMBER
05, 2005
Hoye Archives
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