Tom Scollon
Tom Scollon
Chief Editor		 I was not an early convertee to the gold story although I have been in and out of gold stocks over the years. Certainly gold had a great run up from July to December 2003.

The gold story has always carried great mystique and ironically the oldest evidence of gold usage was for cups and jewellery dating back to 3500 B.C. in Iraq, then known as Mesopotamia.

The phrase “gold standard” was common place for many decades and meant that it was used as the standard value for the money of any country that accepted the standard. But not so today as Britain abandoned the gold standard in 1931and the USA in 1971. Gold is still however an internationally recognized commodity and held by Central Banks world wide. Release and purchase of gold by these banks, as well as supply and demand impact on price and can cause wide swings as the precious metal attracts much speculation, with at times some beating up coming from producers, who of course have much at stake. Demand has certainly increased in line with the recovery in world growth and is likely to continue to do so as world standards of living improve. As well as it being much treasured as jewellery, more and more industrial uses are being discovered.

You will note from the monthly chart below that gold hit almost $900/oz in late 1979 but for most of the last quarter of a century, has spent most of its time below $400. In fact if you look along the horizontal line drawn at the $400 level you will see there has been much resistance and support – that is where the major price action has been.



click chart for more detail

I have marked on the chart what I believe are the Elliot Wave counts. As this is a monthly chart – i.e., the very big picture, action is slow to take place.

At the time of writing gold has hit the $400 mark yet again and the direction is up up and away. But think contrarian, think retracement and there is every prospect that retracement to say $350 could be seen before it attempts a new high. I would be waiting for the oscillator to come back close to zero before I would be confident of a major resurgence.

I have marked W3 again for Elliot and Fibonacci enthusiasts – the first W3 being about $448 but it will need to first break through the $380-$420 levels which have proven to be a tough band for gold and it will need to break through these levels before I would say it is on its way to new highs.

I have marked W5 – the magical $650 echelon. Achievable? Yes but you will have to be patient and spend some time dreamin’.

But there are still good moves to be found in gold stocks for reasons unrelated to the gold price – eg. NCM. Jordan looks at LHG in his options article this week.

Noel also looked at gold last week but this week he has identified yet another sudden turn of events – the Aussie Dollar – interesting reading!

Enjoy the ride!

Tom Scollon
Editor