Gold Price Analysis

In general terms, gold has been testing its all-time high that was achieved on March 17, 2008, at a price of 1,033.90. So far, in 2009, there have been two attempts (some would say three), to reach or exceed that lofty high. Both of those attempts have failed.

Gold is still in an uptrend but showing signs of weakness. Trend indicators on the weekly chart are weak. ADX has risen slightly in the last month, but is below 15. Strong trends usually register 20-25 and higher.

he MACD is in positive territory but is diverging from price – indicating weakening momentum. Stochastics is dropping from its’ overbought level.

The chart pattern, especially from an Elliott Wave perspective, implies that an irregular flat correction has been underway since February 23, 2009, to the present time and is not yet complete. To be complete the market should swing down below 950 and possibly below 900.

Here’s the stickler. If my view of the pattern is correct, there should be one more attempt to move to the upside before the larger correction just mentioned occurs.

Mathematically calculated targets that seem reasonable for an upside move, in the near-term, range from 1,030. – 1,0460.

If the market drops below 970. before the potential rise just described, it will likely mean the high is capped until the irregular flat pattern has reached its downside objectives.


Weekly Gold futures chart from COMEX as at 29 September using NextVIEW Advisor.

In London, the five large market-makers who agree two "gold fixes" each day both to clear outstanding orders and act as a benchmark price – set the AM Gold Fix at $997 an ounce. "Net long" position (of bullish bets minus bearish bets) rose to a new all-time record equal to 795 tons in the Gold Futures and options market. The trust-fund traded as SDPR Gold on the New York stock market increase the volume of bullion held to back its shares by 0.7% to 1,094 tons. London's major Gold ETF provider, ETF Securities Ltd, said it's increased its bullion holdings to a record 261 tons.

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.