A Major Up-Move in Gold Unfolding
The $425 Resistance Zone Seriously
Threatened
Contributed by Olaf Sztaba
NA-Marketletter
www.na-marketletter.com
Posted October 5, 2004
INTRODUCTORY SUMMARY: We portrayed early August jitters
in gold and gold stocks as an "elimination process at work."
We also stood behind our earlier assessment that a "new
up-leg in gold and gold stocks is now underway." Indeed,
after a brief pullback gold and gold stocks pushed decisively
higher. Expect this rally to continue.
GOLD NOW: Gold recently reached the $420 mark
and is only $5.00 away from a crucial resistance zone around
the $425 level. Gold is currently trading above its 50- and 200-day
moving averages, which are both trending to the upside. A roughly
$20 discrepancy between the price of gold and the moving averages
gives the metal space for a healthy, short-term correction. The
50-day moving average recently moved above the longer-term 200-day
moving average, which is a positive signal.
In addition the MACD is trending
higher, above the zero line (bullish).
In the short term gold
may back off to ease overbought conditions but in the longer-term
the yellow metal is on its way to crack the $425 resistance zone.
GOLD STOCKS: On
multiple occasions we have pointed out that gold stocks lead
gold, which usually means higher gold prices in the future. The
yellow metal is rallying again, along with the gold sector. The
XAU and the HUI have been on the rise. Both indices are trading
above their 50- and 200-day moving averages and continue moving
away. As they trade further from the averages the possibility
of a short-term correction increases. The MACD, in both cases,
is trading higher above the zero line.
The HUI and the XAU have just
moved into important resistance zones (please see chart). Gold
stocks may consolidate there before the final assault on the
barrier begins.
In our last gold comment we wrote about expectations. Unusually,
gold stocks started rallying in the latter part of September
rather than the beginning. This factor gives the gold sector
a four-week period before another serious correction would strike.
Gold stocks continue
leading gold. Gold and gold indices have overcome the 200-day
moving averages. Now, only the resistance zones keep the gold
indices from rallying at full force. This will change too.
THE INTERMEDIATE TERM: Two major gold stocks indices, the
HUI and the XAU, have just moved above the falling 40-week moving
averages. This average should turn to the upside soon. The longer-term
MACD moved into the bullish zone (above the zero line) and is
clearly pointing to the upside.
FINAL SUMMARY: The resistance at the $425 level is
close. The proximity of this barrier may cause gold to stand
back in the short term; however, the failure of this resistance
is inevitable.
 Written
October 1, 2004
Contributed
by Olaf Sztaba
Email: osztaba@na-marketletter.com
Website: www.na-marketletter.com
About NA-Marketletter
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