Wednesday, May 03, 2006

Gold XAU 666 Commentary

Gold, Silver and other precious metals like palladium and platinum continue to show excellent performance. Gold cleared the 666$ mark with success that few predicted.
Most gold market commentaries continue to try and explain the roaring price of gold with non direct gold market factors like the Iran conflict and the USDX weakness.

It is reasonable to assume that the Iran issue does have some gold market psychology effect and the outcome is higher short term demand for gold. However this factor is psychological by large and difficult to quantify.

The USDX is completely different factor with longer term structural implications. The correlation between a weakening or potential weakening USDX and rising gold price is losing significance at this stage of the great global gold bull market (GGGBM). The price of gold have recently gained nicely when measured with each and almost every national currency (Gold vs. X)

In the same time direct gold market factor - the relatively large gold short positions that some of the gold mining companies ( Barrick gold ABX, AngloGold Ashanti AU) and other market participants are holding are hardly mentioned. I have mentioned these issues in the past couple of months and you can see more information by searching this site archive. If you are interested in more information regarding internal direct gold market factors I recommend reading the Cheuvreux gold report, the BIS OTC derivatives report as well as this very short Open Interest summery (OI). For those with TA orientation I suggest concentrating on the long term gold charts and using Elliott Wave principle which can at least give a good methodology for mapping of the gold price behavior on different time frames. Elliot wave counting can also improve and enhance the gold price prediction ability especially when combined with Fibonacci series and other technical analysis tools.

Technically short term continued extraordinary strength of impulsive extensive third up wave, not much resistance to be found. As mentioned the secondary b high of September 1980 is worth watching, Now that 666$ price is cleared next obvious psychological upside level is 777$.

Gold spot XAU chart

Suggested books:

Applications of Fibonacci Numbers : Volume 6

Fibonacci and Gann Applications in Financial Markets : Practical Applications of Natural and Synthetic Ratios in Technical Analysis

Elliott Wave Principle Key to Market Behavior

Liar's Poker: Rising Through the Wreckage of Wall Street -Insightful & Funny

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