Current Gold Market Situation

Freemarket Gold and Money Report (05/25/2009)
"Our patience is finally being rewarded. The precious metals are on the move, and higher prices are likely in the weeks ahead.

While for months there has been every reason to be bullish about the prospects for both precious metals from both a short-term and a long-term point of view, we have been frustrated time and again. Upside breakouts were stopped cold. The point is that markets do not necessarily move when you want them to. They move when they are ready, and it appears that moment has now been reached for gold and silver.

Gold and silver have been in a correction since March 2008. It has been a period of important base-building, which is now almost complete. As a result, their charts look very bullish, and it is not an overstatement in my view to assert that gold and silver are on the verge of an historic break-out that I expect will mark the next leg in this precious metals bull market.

I have a number of observations about gold's current technical position. First, the 'head & shoulders' pattern that I highlighted in the last letter is still developing nicely. This pattern will be complete when gold breaks above $1,000, which event looks likely soon—probably sometime in June.

Second, I have expanded the 'V' pattern discussed in recent letters to mark the extent of the base. In short, the 'V' is huge, both in depth and the length of time it took to form. It will be very bullish for gold to break out from this basing pattern, which represents a base that is big enough and strong enough to carry gold much higher (i.e., well into 4-digits).

Lastly, gold is above its 200-day moving average, and less than 5% below its all-time closing high. Both of these very bullish observations bode well for gold in the immediate future."

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