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Gold Cycle Revisited

01/29/04 08:09:02 AM
by Koos van der Merwe

On June 18, 2003 I presented a daily chart of the London PM Gold cycle with observations. Has gold stuck to that cycle?

Security:   GLDL
Position:   Hold

The chart is pretty much self-explanatory. The expected cycle low of August 5th was met but with a minor low, part of a consolidation triangle formation. The expected high of September 24th was also met, but the low expected for November 25th was a higher insignificant low. The high of January 12th is far too early, suggesting that the gold price could rise from present levels to meet the expected high of February 6th, before falling into the April 1st cycle low, (or could it be an April fool's low similar to the one in November?). The triangle, that has formed is suggesting a target of $439. (375-255 = 120 + 319 = 439).

Is the unusual pattern of the gold cycle still there? The answer to this question appears to be a decided yes. Holders can definitely expect an upward move to the February 6th cycle date, but I don't believe the move can exceed the $425.51 of January 12th.

The gold cycle.
Graphic provided by: CQG.
Will the target of $439 will be met before or after April 1st? I believe it will be after April 1st, but possibly before the next cycle low expected at the end of July. Finally, would I buy gold shares at present levels? Yes, but selectively and non-speculative. With Central bank selling as gold moves to higher levels, holding gold shares could become risky.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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