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Gold – A Timely Lift from an Oversold Condition

Technical observations of

Bob Hoye
Institutional Advisors
Posted Dec 23, 2011

Written Dec 20, 2011

All our models called for a low in gold last week. The straddling of the 55-day Bollinger Band, break of the 144-day moving average and violation of the September 28th closing low matched the models we have been tracking. Where to now? The magnitude and sustainability of the next rally should establish the outlook for next six months.

  1. Based upon the placement of the high Silver/Gold ratio in April, the October 1974 model allows for a rally to $2000 by the end of January.

  2. The second scenario (similar to 2004) calls for a rally into the second half of February, approaching the all-time high.

  3. The 1998 T-Bond model, calls for a high around January 5th, coupled with a test of the 21-day Bollinger Band; currently $1798, but likely to converge at a level closer to $1740.

  4. The final model is that of April 1975, calling for the market to be capped at $1700 through the end of January.

Reminiscent of the silver rally of February to April 2011, we need to keep an eye on key supports and retracements that are allowable during the rally phase of the move while we await potential topping signals. For now, the maximum retracement that is allowable is 62% ($1584) from the December 14th low.

The upside reversal of the equities and commodities in the past week coincides with the top in the U.S. Dollar Index. Look for the Dollar to drop back to the higher of the 34-day Bollinger Band (now 76.29) or the 89-day exponential moving average (now 77.55) into the middle of January.


Bob Hoye
Institutional Advisors

Hoye Archives

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