Fractal Gold Report for September 29, 2010

By David Nichols
dnichols@fractalpublishing.com

I have some afternoon obligations today, so I’m writing this early, a few hours before the close. But it looks like gold is going to sail into the close at fresh all-time highs around $1,308, after a somewhat tumultuous — but super bullish — trading day.

A major spike of upside energy came into gold after a lightning-quick 38.2% retracement in overnight trading. This sort of “slingshot energy” is just perfect for gold right here, heading into the last one-third of the 64-day growth pattern. I think this is a clear signal that gold could go absolutely berserk to the upside into Day 64 on October 26th.

The overnight retracement was particularly interesting, as gold managed to retrace the entire move up from Day 32 to Day 43 in just a few minutes of crazy trading.

This retracement “liberates” gold to go immediately higher, despite the already-significant uninterrupted rally off the bottom 2 months ago. The hallmark of this 64-day growth pattern has been just this type of quick and efficient 38.2% retracement, which quickly fulfills the requirement to retrace and allows prices to continually press higher.

I also think the daily fractal dimension down at 39 will not be an issue right here, as this stage of a growth pattern can take the linear movement to an extreme; plus the rally over the past few weeks has been more of a “slow grinder” so that will keep the fractal dimension from getting too stretched.

In the short-term — that is, over the next day or so — gold should just park it here around $1,310.

It’s typical after a big move — and this one traveled up over $32 from the intraday low — to see a tight short-term consolidation, as prices hover right around the highs. So through the overnight trading session, and likely into the morning on Wednesday, gold should hover right around this $1,308 area.

This will set up the next surge of upside energy, which should hit into the end of this week. The next target level is up at $1,334, which should only be a waypoint on the way up to at least $1,420 by October 26th.