COMMODITIES

Gold has been consolidating since reaching a high near $1,800 per ounce in early October, and MoneyShow’s Tom Aspray goes prospecting for buying opportunities should the yellow metal finally break out of its current rut.

As gold prices have grinded lower from the early October highs and stocks have skyrocketed, the interest in gold has continued to decline. The flurry of bullish recommendations in late September was in sharp contrast to the high bearish sentiment evident last summer.

The high-volume selling last November was a sign that the bears were back in charge and that the correction from the September 2011 highs was not over yet. As I noted in a look at the yearly charts, the Spyder Trust (GLD) did close up 6.84% in 2012 but still it was a disappointing year for gold investors.

Regular readers are likely aware that my long-term outlook for gold prices and the Spyder Gold Trust (GLD) has been positive for many years. Even though there are currently no gold positions in the Charts in Play portfolio, I see no change in the long-term trend.

A look at the monthly chart of gold prices and the weekly/daily charts of the Spyder Trust (GLD) suggests that there will be opportunities for gold investors in 2013 but further patience may be required. Going back to 1976, the seasonal tendency is for gold prices to top in February and then bottom in July.

chart
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Chart Analysis: The monthly chart of the Comex gold contract that goes back to 2011, uses the continuous contract that includes volume from all open contracts. The expanded view of the 2001-2002 period highlights the important low in 2001-2002.

  • At the end of June 2001, the on-balance volume (OBV) moved above its 21-period WMA for the first time since October of 1996.

  • The following month, it pulled back to its WMA before it again turned higher (see circle a) and by the start of 2002, it was in a clear uptrend, line 1. The bull market was underway.

  • As the vertical lines illustrate, this has been in the cast for the past ten years but in some instances the monthly OBV made a new high the month before prices peaked.

  • The confirmation of each new high in gold prices (lines 2-5) was a sign that the bull market was intact.

  • Often times the OBV has led prices higher as in September 2007 when the OBV surpassed the high from early 2007 as it closed at $681. This was a good leading signal.

  • By early 2008, gold made a new high of $1,033 that was again confirmed by the OBV.

  • The new highs in November 2009 (line 7) were also confirmed by the OBV.

  • From March 2010 until August 2011 (line 8), the monthly OBV made a series of higher highs, but in August, gold had traded above the monthly starc+ band for three consecutive months, which was a strong warning sign.

  • The monthly OBV confirmed the 2011 highs consistent with a positive major trend as has developed a 13-month trading range and is currently below its WMA.

NEXT PAGE: Do the Weekly or Daily Charts Look Better?

Tickers Mentioned: GLD