Gold sees bear cycle coming to a close in December: Elliott Wave

Posted by David Banister - Resource Investor

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Our Last major Elliott Wave Analysis of gold came in early September when gold (COMEX:GCG14) touched the $1,434 area, and in that analysis we called for a re-test of $1,271-$1,285 levels. This was based on our Elliott Wave Analysis of the patterns involved since the $1,923 spot highs in the fall of 2011.

Most recently, we noted that we are seeing patterns commiserate with whatElliott Wave Theory calls a “truncated 5th wave” pattern. All bear cycles have 5 full waves to the downside from the highs, and we have been in wave 5 since the $1,434 highs.  The key then is determining how low that wave 5 will take you in Gold, and planning your investments and timing around that forecast.

To qualify for a truncated 5th wave, you have to have a very strong preceding 3rd wave to the downside. In this case, we had that as gold dropped from just over $1,800 per ounce to $1,181 into late June 2013.  Recently, gold hit a bottom at $1,211 spot pricing last week and that is when we began to consider a truncated 5th wave pattern.

We sent our clients about a week ago regarding this possible Elliott wave theory bottom:



If we fast forward a week later, we had gold running up to $1,261, which was the pivot resistance line. We hit it on the nose and backed off to $1,224 yesterday.  We now expect that if gold holds the $1,211 area, then we will again rally back up and over $1,261 and then head to the $1,313 resistance zone. We would like to see gold get over $1,313 and if so our targets are in the $1,560 ranges in the first half of 2014. 

Aggressive investors should be accumulating quality small-cap gold producing and exploration, or gold itself depending on your preference during these last few weeks of December as our Elliott Wave Analysis is signaling a bottom is near. We would again watch $1,211 as a key level to hold for this possible truncated wave 5 to work out. 

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