Gold Showing Clear Signs of Heading Higher

12/21/2010 12:01 am EST


The gold bull has been moving in very reliable Elliott Wave and Fibonacci patterns for many years now, but once in a while, the waters get a little murky for sure. Recently, we have seen a fair amount of volatility near year end as position squaring and year-end machinations take hold. With that said, it does appear that gold should be poised to power higher in the near term, and I'm looking for a completion to a five-wave rally that began from about $1,040 per ounce in February of this year.

Over the past several weeks, I see a clear Fibonacci trading day relationship on gold's swings from pivot highs to pivot lows. Eight days of correction, 13 days of rally, 8 days of correction is the recent pattern over the past five weeks or so. Below is a chart outlining these crowd-behavioral-based patterns that I rely on for both my trading service and market forecasting services. You can see the clear relationships, confirmed by the Stochastics indicators at the tops and bottoms as well:

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Based on the recent patterns, I believe we completed a minor wave three from the February bottom at $1424 a little over five weeks ago and had a shallow period of eight days to complete a wave four to $1,330. Now, we are in the fifth and final wave up pattern to complete an entire five-wave move from February of 2010. In the near term, then, I'm expecting a pretty strong rally from this recent $1365 area to at least $1,480 per ounce and eventually a good shot at completing the structure at the $1525 range. Short term, we should begin a wave three up here, followed by a fourth wave correction, and then a terminal fifth wave. Below is a multi-month weekly chart view of where I see us heading and where we've been.

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By David Banister of

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