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A few months ago I wrote an article on Gold (GC-SpotV) headed “Golden ABC” and discussed a short trade opportunity on the first lower top off the all-time high on Gold. The all-time is high is still $1033.90, which occurred on the futures market on 17 March 2008. Gold vigilantes would have noticed the double top formation on 17 April 2008 (one month from the old time high) and how this was an even better setup than the one I discussed in my original “Golden ABC” article. Time and price analysis would have given those astute traders a reason to go short.
I can hear you all saying, why is he talking about going short on Gold when this market is going up? Whilst you may have a valid point, the comments in that first article need to be put in context. In the last paragraph I wrote, “I do not necessarily think this is the end of the bull run for Gold” and that “the pullback may be a temporary correction”.
To be frank, I always had a longer term bullish view on Gold. Commodities are an area that all Safety in the Market traders should be focusing on at the moment, because there are excellent opportunities for profit. If you have been to any of the recent Trading Tactics seminars at which I presented you would know the analysis I have been doing on Gold, the way I’ve been trading it, and what I have been anticipating.
When Gold rallied from the 2 May 2008 low and began to head higher I was reasonably confident that the pullback was merely a temporary correction and another run up was imminent. From an analysis standpoint, Chart 1 illustrates my thinking on this. I have used the Gann Retracement Tool in ProfitSource to measure the recent range up on a weekly chart in order to determine the extent of the pullback in relation to this range. You can see how Gold found support at around the 50% level of the range up.
Chart 1 – Weekly Chart
click chart to enlarge
Since the May 2 low, Gold consolidated in a sideways pattern until an eventual breakout from this consolidation occurred towards the end of June – as shown in Chart 2 below. The safest place to take a long trade would have been the first higher swing bottom after the breakout, which occurred on 8 July 2008.
Chart 2 – Daily Chart
click chart to enlarge
I have also shared my thought process in Chart 2. In my mind I can see Gold reaching new heights in the coming weeks or months. The ideal situation is to see added confirmation that this may occur. I would like to see Gold test old resistance levels, which I have highlighted in Chart 2 with aqua coloured circles (found in Drawing Tools in ProfitSource). If the market can create a swing bottom at or around these levels, and it is above the 50% retracement level, look for Gold to test the $1000 price level and beyond.
Will we see Gold make a new all time high? Only time will tell. On current form it sure does look likely.
Happy trading!
Rick Akdagcik
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