Gold Close to Confirming a New Breakout to All-Time Highs

Source: David Banister, Market Trend Forecast (8/7/12)

"I expect gold to rally for about 8–13 months into at least June 2013, and our longstanding target has been in the $2,300/oz arena."

Back in the fall of 2011 I was warning my subscribers and the public via articles to prepare for a large correction in the price of gold. The metal had experienced a primary wave 3 rally from $681 per ounce in the fall of 2008 to the upper $1800's at the time of my warnings in the fall of 2011. A 34 Fibonacci month rally was sure to be followed by an 8-13 month consolidation period, or what I would term a Primary wave 4 correction pattern.

We have seen gold drop as low as the $1520's during this expected 8-13 month window, but at this time it looks to me like a break over $1630 on a closing basis will put the nail in the wave 4 coffin. I expect gold to rally for about 8-13 months into at least June of 2013 and our longstanding target has been in the $2300 per ounce arena in US Dollar terms. Some pundits have much higher targets in the $3,500 per ounce or higher area but I am using my low end targets for reasonable accuracy.

This 5^th wave up can be difficult to project because 5^th waves in stock or metals markets can be what are called "Extension" waves. This means they can have a potentially much larger percentage movement relative to the prior waves 1 and 3 of the primary bull market since 2001. You can end up with a parabolic move at the end of wave 5, where those $3000 plus targets are possible. I expect the 5^th wave to be about 61% of the amplitude of wave 3, which ran from 681 to 1923, or about $1242 per ounce. If we were to apply that math, we come up with $767 per ounce of rally off the wave 4 lows. $1520 plus $767 puts us at $2287 per ounce, or roughly $2300 an ounce low end target.

In summary, crowd behavior is crucial to the next coming movement in gold and it could be a sharp rally that catches many off guard, much like the downdraft last fall did the same to the Bulls. Be prepared to go long gold once over $1630 per ounce and buy dips along the way up to $2300 into the summer of 2013.

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David Banister
Market Trend Forecast

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