A very sharp guy and a regular on the Keiser Report. All the best.

Could gold be about to see a massive break-out?

Dominic Frisby

January 16, 2013

On another positive note, gold data-wrangler Nick Laird of www.sharelynx.com pinged me an email yesterday, which I'd like to share with you. Laird is bullish. He cites a chart pattern from Robert Edwards and John Magee's classic Technical Analysis of Stock Trends - the consolidation, the break-out, the re-test and then the major run.

Below is the chart Nick sent me. It is of gold since 2007. Take a look at it – then I'll try to explain the lines he has drawn on it.

(Click on the chart for a larger version)

Looking first at 2008, you can see the period of consolidation from early in the year as gold fell from just over $1,000 to $680. When gold broke above the two falling black diagonal lines, this was 'the break-out'. The inverted red 'V' marks the re-test.

We then had that wonderful, two-year 'major run' all the way to $1,920 an ounce, as marked by the rising green diagonal line.

Now to the current situation. Laird feels we have had the 'consolidation'. The move above the two falling black diagonal lines in September 2012 was the 'break-out'. The inverted red 'V' marks the 're-test' - which ended a few days ago.

Next comes the 'major run'.

Here are Laird's words: “Theoretically, this buy point is a big one. We did the consolidation wedge from 2011 through to Sept 2012 and then broke out. We have just seen the test of the breakout and, ideally, this now should be the beginning of a new major leg up similar (and bigger) than the one from 2009-2011.

“Last time we went from $700 up to $1,900. This move should be larger and over a shorter time period. This is classic technical analysis, especially over a two-year formation. A breakout will be followed by gasps of surprise.”