Gold Guard Rails – Gold Price Breakout
When you examine a simple chart like the one below, it is easy to see that since mid-2011, gold has been trading sideways – almost as if the price were bordered by two guard rails. The longer this sideways price action takes place, the more significant the eventual price breakout will be. Let’s take a look at the chart:
Red Former Resistance Line: Gold eventually broke through its down trend in August 2012 when it rose above $1,695. If gold cannot hold a price retreat to $1,695, we’re headed to $1,650.
Green Uptrend Line: Gold is still firmly entrenched in an uptrend. Gold has increased 7 times since its 2001 low of approximately $256. No change in sight.
Blue Price Support Line (lower guard rail): Support for gold has held at $1,550 since its initial break through that level in July 2011. Note how the gold price has repeatedly come down to test that level, but has been unable to break through. Thus, $1,550 has become very firm support and falling below that mark is highly unlikely.
Blue New Price Resistance Line (upper guard rail): Notice how gold has attempted to break out above $1,800 at least four times since 2011. This indicates very firm resistance. When (not “if”) gold breaks out through this level, the next stop is the former high of approximately $1,920.
SO, WHAT’S GOING TO HAPPEN NEXT? Gold will bounce around between the guard rails until it breaks out either up or down. There is a 80% chance the break is up, and only 20% down. Resistance, upper or lower, is always eventually broken. The gold prices will eventually break through to the upside (even if it breaks down first). REMEMBER, we are in a precious metals bull market and the trend is UP. Never go against the trend.
All Things Considered – John’s Commentary:
What to do now: Gold will break out above $1,800, and when it does it will be decisive. BUY GOLD anywhere between $1,650 and $1,795.
Do not watch the price too closely, or allow greed to set in and try to squeeze out the last dollar. When gold goes to $2,000, $2,500 and $3,000, you will have forgotten the exact dollar amount you paid. The MOST IMPORTANT thing will be that you own the gold you wanted, and didn’t miss out waiting for that one last dip – that never came.
What to buy now: The current lowest premium gold coins are Austrian 100 Coronas, followed by Krugerrands and Maple Leafs. In silver, buy pre-1965 90% silver coins until storage space becomes an issue.
Quote of the day: “In the end, more than they wanted freedom, they wanted security.” – Edward Gibbon
