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Metal Detecting

01/14/02 11:49:30 AM
by Austin Passamonte

Are the precious metals poised for an upward move? Some of the related charts seem to indicate just that.

Security:   XAU, PDG
Position:   N/A

One of my favorite TV programs are those Gold Fever shows on the Outdoor Life Channel. How great would it be to go out in the wild, splash around in some remote creeks and pan out some raw hunks of gold?

For those who fantasize about striking the mother lode in the comfort of their own home, we might have the next great gold rush headed our way pretty soon. While it may not be fair to call it the mother lode, let's see what the charts have in store:

Figure 1: Weekly Chart: XAU
Graphic provided by:
Graphic provided by: QCharts.
The XAU Gold & Silver Index has traded beneath historical resistance dating back to October 1999 when gold spiked on Y2K fears of a world on the brink of disaster. Once the lights went on in Georgia after New Year's Day, price action calmed dramatically.

That measure of resistance was tested a few times in the past two years and lo & behold, price action broke and closed above this line on Monday. While one session does not equal a weekly candle completion, it is a fair sign that color may start showing up in our pans real soon.

Figure 2: Daily Chart: PDG

Perusing the components of XAU Index didn't turn up a lot of exciting setups but Placer Dome did catch our eye. Looks to me like a head & shoulders bullish reversal pattern in the works. See the head and both shoulders in semi-apparent formation? If that's the case we see where price action broke above on Thursday and continued higher from there.

A long entry near $10.75 may have been the ideal spot for now, but don't be surprised if that neckline of resistance-turned-support gets tested one more time. Stochastic values are toppy right now and a reversal down from overbought extreme could find price action consolidating near the neckline of support. A second test and bounce from this measure might be a very high-odds long play indeed.

In summation, no need to brave the Yukon ice and snow for potential profits in gold. If the precious metal index is correct, we may pick & shovel our share of gains right from the comfort of our very own keyboards!

Austin Passamonte

Austin is a private trader who trades emini stock index futures intraday. He currently trades various futures markets from home in addition to managing a trader's educational forum

Title: Individual Trader
Address: PO Box 633
Naples, NY 14512
E-mail address:

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Date: 01/15/02Rank: 5Comment: 

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