Last Updated : 03 November 2011 at 14:05 IST

Gold targets $2350 as Wave 5 begins, $1680 critical

By David Banister
It’s been several weeks since I’ve written about Gold and we have had a wild ride since the $1910-$1920 highs in August. At the time as we approached I forecasted a major correction was due and we were shorting the rise from $1862-$1910 prior to a huge $208 drop that took place over just a few days. We covered our short at $1725 and then Gold rallied back to a double top at $1920 and then fell back to $1531.

That pullback to $1531 qualifies as a Fibonacci retracement of the 34 month rally from $681 to $1920, and would also qualify for a price low for a 4th major wave correction. My initial targets for the Gold pullback were $1480-$1520 if the $1650 area was violated. Most recently we have seen Gold run up to 1681 which is another Fibonacci resistance zone a few times and then back off to the low $1600’s.

With the recent push over $1681, we can now confirm the 4th wave is over at $1531 lows and that the 5th wave is likely in the very early stages, but beginning to build steam. I will say that we want to make sure the $1650-$1680’s areas are defended by Gold on any pullbacks in order for this forecast to remain valid.

During this 5th wave up, eventually we should see the $2380 ranges in Gold, but it will not take place overnight. In the next few months I am looking for Gold to attack the $1900 range, possibly even by year end, and then in 2012 attacking the $2000 plus ranges.

With all of the Macro events in Europe changing on an almost daily basis, the whipsaws in both the precious metals and equities markets are difficult to forecast and trade for most investors. Gold has about three years left in a 13 year bull cycle if I’m right.

Below is the updated weekly chart of Gold. You can see prior lows as they related to oversold indicators, and where we just came off the 1531 lows and its Fibonacci pivot along with the oversold indicators below.

Look for Gold to attack 1775 first, then 1800, 1840, then 1900 in the coming 6-10 weeks or so.

Courtesy: www.markettrendforecast.com