YeOldGoldNugget's Blog Spot: Gold Breaking Out of Upper Trend Channel

Gold Spot Daily Chart

Chart is courtesy of marketclub.
Marketclub - Gold Spot Trend Analysis.

Lets start by taking a look at the daily chart of gold. As you'll notice I've marked some important highlights on the chart. The bigger, the upper and the lower trend channel are of importance. I've only ever seen others using the lower channel and that is something that I do not get? Why limit yourself, why limit gold in such a narrow space while the last couple of months have shown and proven that gold is ready and has been ready since 2008 to get into a higher trend channel. The lower and center one just...

DO NOT QUALIFY ANYMORE!

I think we have passed that time frame. When I wrote my article at the beginning of October 2009 I was not kidding with the Neon signs.

You can see from the chart why I started using the bigger trend channel. If you take a look at December 2008 you'll see gold made 2 runs for the upper trend line. After the first rally gold consolidated to the 10 MA line and after the second rally gold consolidated to the lowest trend line. From that point which is around January 15, 2009 gold starts to move to the upper trend line and hitting the upper trend line the 23th of January. If you look closer you'll see from that moment that gold keeps trading on or around that upper trend line and does so till we reach February the 10th, 2009.

Johnson Matthey 1-Kilo Gold Bars - Copyright © 2009 Northwest Territorial Mint

Gold then again rallies further above the upper trend line before hitting a high of about 1006 on February the 20th, 2009. It then drops to...AGAIN...the upper trend line and keeps trading at that level for several days until we hit March the 19th, 2009 and reach a point where gold makes a drop towards the lowest trend line. It then plays a bit with the lower trend channel and reaches a low at April the 19th, 2009. Gold starts to rise again and this time back to the upper trend line. It does so, not in a straight line up but with a lot of trading around the center or rather the upper trend line of the lower trend channel.

Gold reaches the upper trend line around the start of June 2009. It then drops again with as target the lowest trend line but only drops after maintaining a 15 day close contact with the center trend line before saying goodbye to it and at the start of July 2009 we see gold moving away and dropping towards the lowest trend line and hitting that, July the 12th, 2009.

From this moment, July the 12th, 2009 could very well be the last time gold is trading in this lower trend channel and thus the lower prices. As you will see from the start of September 2009 there is a break from the lowest trend line, keeping tight contact with the center line before reaching October 2009 and making a break for the upper trend line, consolidating only once in the process. That happened just last week and now we're already firmly back at the upper trend line and as of November 3, 2009 we have broken the upper trend line and have kept above it for 3 days now.

MACD looks good. You'll see that MACD keeps making higher and higher bottoms which is very bullish to put it mildly. RSI only just reached overbought but as you can see and as I've explained before, gold can stay in overbought zone for days and weeks on end. When fundamentals are strong then forget about looking at RSI, better then to look at Stochastics. To each their own of course. Whatever works for you.

Let me continue with the weekly chart.

Gold Spot Weekly Chart

Gold Spot Weekly Chart November 06, 2009

Chart is courtesy of marketclub.
Marketclub - Gold Spot Trend Analysis.

OK, the weekly chart, this is where we establish and confirm the trend AND direction. Read the highlights and then tell me what you think what all that means and where you reckon gold will go to next? Up or down? 1500 or 750? Who's with me on the 1500? You'll see from the start that September 2007 gold started rallying and didn't stop until it gained...

A WHOPPING 350 POINTS

That brings us to the big consolidation starting around mid March 2008 and bottoming out at the height of our crisis in October 2008. You will remember remember, the 5th of November 2008 or rather the months when all the stimulus package were announced and in fact the very same months that the printing presses were doing overtime.

Sure, it has been a bumpy ride but if you look from the weekly chart, gold not only broke out of our weird Elephant man's right shoulder at the beginning of October 2009 but gold also remained firmly held between the trend lines of the greater trend channel and has since this week broken the upper trend line and is holding above it.

Now, does YeOldGoldNugget dare to say that we are now again at a possible breaking point?

YOU BET YA

Maybe something like what happened at the start of October 2009, maybe a bigger move? Will that rally start right now or will we first make a consolidation? Who knows? One thing I do know, time to go short or bet against rising prices,...probably not THE smartest of things to do right now. If not something you take from this article then maybe this would be a good one to remember.

Also, one of the things most people throw around as argument, or basically because they really don't get it, anyway, it goes like this, 'Gold is just another bubble'...is what they say.

You know what YeOldGoldNugget says about that?

I'd say we are about this far in our bubble (See image for visual representation). Oh, Oh, Oh, but but...is how it goes when I counter argument them...before they slam another totally idiotic remark my way.

You really have to be sitting down before you read this, better yet, secure yourself firmly to your seat before reading their next moronic argument. Ready for it?

Just see what happened to oil when it reached $147!

Yeah yeah, that might very well be about oil being a bubble, but comparing gold to oil? Comparing gold, a substance which is so rare, which has been used throughout ages and centuries as a precious commodity and a means of preserving wealth. A substance which not only is rare but is rare for a very specific and just meaning. Gold is not formed on this planet, it is formed in our universe. Also, when I say universe I'm actually undervaluing the rarity.

Gold is not just created in the universe, for gold to come into existence, enormous forces are required. Not even the forces of nuclear fusion working frantically in the center of stars suffice for gold's needed reaction to happen. No! For that to happen we need our stars to go SUPERNOVA!

Only then are circumstances at an ideal for gold to be formed. And no, YeOldGoldNugget is not sucking this one from his thumb. There are some great study's which have been done about the necessary requirements to create gold.

Well, don't know whether you heard the story about turning lead into gold? Turns out those alchemists or transmutationists of back in the days might have not been that stupid at all...at least not in their thinking pattern. Turns out they started with the wrong compound - and a tad short on the required energy - but were right about the process being a possibility. It is thus actually possible to create gold on this planet. Not by using lead mind you but by using an isotope like mercury.

And that is just the start of your efforts, that was the cheapest part by the way, the mercury. However, mercury or Hg as its known from the periodic table has 80 protons. Gold or Au has 79 protons. So, mercury seems to have one proton to many! But since it is the closest family to gold, a prime candidate for our experiment. Sadly, to get mercury to ditch its 80th proton we need a process called electron capture which is performed in a nuclear accelerator. Bombarding our mercury with enough high-energy neutrons will do just that...leaving us with pure gold!

So yes, those alchemists were quite right, however, turns out if they were looking to create a penny's worth of gold from mercury it would take them and are you ready for this... 1,000,000,000,000,000,000,000,000 years. I do not take credit for the calculation, for that you need to contact Barry L. Berman who is a physicist at George Washington University.

Oh oh oh, I hear, and what about gold's other closest family in the periodic table. 'Left' next to gold so to speak. Who is Mr. Proton 78 looking to trans mutate into Mr. Proton 79? Well, turns out its quite a familiar presence.

Meet Mr. Platinum! Trading at or about $1340. Hm? Using something which is valued at $1340 to create something which is -now- valued at $1090? Well, it is scientifically possible but needless to say...even costlier than using mercury.

This following calculation was found on the Cosmic Conservative website.

The best estimates I’ve seen put the total weight of gold ever mined to be about 160,000 tonnes. A tonne is 1,000 kilograms, so that’s 160,000,000 kilograms. Gold weighs 19.3 grams per mililiter. A mililiter is one cubic centimeter. 160,000,000 kilograms is 160,000,000,000 grams. Which comes to roughly 8,300,000,000 cubic centimeters. There are 1,000,000 cubic centimeters in a cubic meter, so that means the volume of all the gold ever mined is about 8,300 cubic meters of gold. That’s roughly a cube of solid gold 20 meters on a side, or about 65 feet on a side.

In other words, all of the gold ever mined in the history of the earth would fit in a moderately sized house.

So, whenever you hear someone mentioning those two ridiculous claims towards gold then you'll know what to tell them! Comparing oil, a mix of naturally occurring organic compounds from within our earth and which are basically made up of nothing more than hydrogen, carbon and oxygen...TO GOLD? Heretics! The nerve of some people! Any reason is reason enough to drag gold down I suppose. Good luck with that trading strategy in the coming years ROLF :-)