Commentary

Gold Looking Good, But no Breakout... Yet

By Gary Tanashian

December 22, 2007

click chart to enlarge

Yesterday was 'wicked pissah!" as we say in Boston. The day before, a colleague sent an email talking about a gold breakout. Where he got that from I don't know, but it is indicative of how quickly sentiment can change in this sector. Everything is 'steady as she goes' in my book and buying the deeply over sold HUI-Gold ratio appears to have been a good strategy. In fact, if the HGR does what it did during the August bottoming process we may get another chance to add positions as it retraces maybe 50% of yesterday's hysterical gain.

There are US Dollar bulls coming out of the wood work now and our dear old uncle with the major debt load in his shorts may indeed rise more in the short term, but here are some factors that could fuel gold's rise to 900+ in the near (next 2 months) term: 1) The USD is even more over bought than it was on the chart that was shown a few days ago, 2) Gold's RSI shows significant room to rise, 3) Weekly & daily symmetrical triangles project gold to 900+, 4) Sentiment appears to be panicking back into the inflation trade and the 'January effect' story in the broad markets, 5) We got what we needed; an utter wash out of momo's who had no idea why they were doing what they were doing and 6) In a world where utterly debased funny munny propels paper assets ever higher in a macro Ponzi scheme of epic proportions, well, you just never know when the gold market is going to say "enough of this #@%!, I am outta here!" and propel higher, not to return until societies change the root mechanics of how they create, deploy and bastardize what we call 'money'.

Nothing is fool proof, but at least a set up appears to be in place for the next several weeks to months. Good luck, enjoy your holidays and keep your head screwed on straight - HUI has not yet negated the 'potential' head and shoulders top although the XAU appears to have done just that as of this writing.

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