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Gold Breakout: Why it hasn't happened...Yet
Pinnacle Digest writes: As our team explained in last weekend’s Volume titled, The SPDR Gold Trust Sets a Double Bottom, gold is continuing its consolidation round and has confirmed a double bottom is in. This does not mean it will be smooth sailing to new all-time highs anytime soon, but the chances of a new low is very unlikely.
Jordan Roy-Byrne discusses the technical aspects of gold in his most recent commentary. He explains that gold has consistently made impulsive advances that were digested by multi-quarter corrections. Following these corrections (or consolidation periods), gold broke out to new highs. During the last major breakout (in late 2009), gold enjoyed an extended, impulsive advance that lasted two years. Previous impulsive advances lasted less than a year.
This time around gold has been a bit slow off the blocks. In previous consolidation periods, gold, within a year, was able to rally back near the recent impulsive high. Roy-Byrne explains that gold will likely rally back to $1800 or $1900 and then go through a multi-month consolidation which would then lead to an impulsive breakout. Conservatively speaking, over the next 12 months, we could see a rally back to $1900 followed by a final consolidation.
Gold's current consolidation is 12 months old. Previous consolidations have lasted between 16 to 20 months. Although gold is consolidating at higher prices, a new all-time high may still be a couple years away.
Roy-Byrne reminds us that the quarterly high prices for gold and silver are roughly $1750 and $39 - far off from the 2011 highs.
Well run gold mining companies, with planned production increases, could very well move to new highs if gold returns to $1750 and silver moves past $35. Our team believes these estimates to be conservative and very likely outcomes in the fall.
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