BarroMetrics Views: A Perspective on Gold
Deric asks: “Can you give me your views on Gold?”
Sure. I like to start with a context. In the case of Gold we have a Fundamental as well as a technical one. In my view, the quantitative easing by the US Government will result in inflationary pressure once the excess funds leave the St Louis Fed Reserve and hit Main Street – we need only see the current Chinese situation to see the truth of that statement. In addition, the current economic climate and political tensions, will also positively impact the price of Gold. So Gold’s two main drivers, the state of the US$ and political tensions will provide a supporting environment for Gold.
Turning to the technical context: Figure 1 is a 3-month chart of Gold. Two things jump out at me:
- Gold has moved up parabolically since Oct 2008 and
- The target for the move is around 1510 to 1358.
Looking at the current situation: Figure 2 shows an 18-day chart (monthly trend) of Gold (CSI-Perpetual Series). We see an Upthrust Change in Trend; this signals the minimum target as being the Primary Buy Zone at 1086 to 1065 (Purple Lines). Note that the Primary Buy Zone is at the 38.2 retracement level of the range 704 to 1270.
So in Summary:
I am looking for Gold to drop to the 1086 to 1065 area where I would look to be a buyer. My long term perspective is for Gold to reach at least 1510 to 1358.
Figure 1 GC 3-month
Figure 2 GC 18-day