James Sinclair On Gold -- Up, up and away

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    A Review of Gold August 27, 2002
    by James Sinclair

    Since mid-June, we have been in a reaction in the gold and silver price. Today, gold moved slightly above the $312 resistance level. The question in everyone's mind is "Are we out of this reactionary phase and in a new leg in the gold bull market?" Since, I know as a trader myself, you want clear and precise answers, allow me to respond:

    Yes, the reaction in precious metals is behind us.

    Gold has fulfilled its downside objective in the spike down intra-day to 298.

    In practical terms, $302-$305 has held the decline in gold as it represents that level at which the Risk Control Programs have returned all gold derivatives to their fully exposed short spread position.

    At present, there is a window in time that will allow the general equities market to snap back from decline with significant rallies.

    Therefore, the way for gold to move to a new high in this leg will be hampered by setbacks due to talking head heralding a "Return to Reality" (theirs) with each rally.

    The gold shares are in a new leg up in their bull market.

    Much of the share debacle came as a result of the promotion of the Prechter deflationist scenario, coupled with an overbought condition that the gold shares had accumulated.

    The period in which the general equities market has rally potential will end early in October.

    After that, the gold and silver market will have an uninterrupted period in which a new high in the present leg is quite possible.

    The key number on gold is now $329.94. The derivative WARS, which are being fought between the JPM, Goldman, Lehman, Merrills of the world, and the Asian bullish interest will be lost by the Gold derivative dealers when gold closes above $330 now, not necessarily the $354.

    A close above $330 will give us, IMO, $380-$400.

    Gold is in a transition back to currency where it has significant value. When gold is purely a commodity, it is of questionable value. It is this transition which underscores the bull market for gold.

    By the end of the year, all 5 criteria for a long term bull market in gold will be in place. When that occurs, the bear raids of the gold cartel will be history.

    Overhead resistance is at $312.50 today. We are as I write at this on the cash gold bid. Above that we have significant resistance at $317.50 and then at $329.94.

    It is not all-clear skies for gold yet, but it is in the making.

    © 2002 This is a FMU copyright article. Permission to reproduce is hereby granted, provided phrases are not quoted out of context and provided full by-line credit is given with web address: www.tanrange.com

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