Gold Analysis and Strategy 21st of August 2010 by Florian Grummes

Gold Spotprice Analysis

Gold in USD (one ounce = US$1,227.70)

· During the last two weeks Gold demonstrated enormous strength and easily conquered the resistance area around US$1,218.00-1,224.00US$. Gold climbed even higher to US$1,237.50US$. From here a small consolidation has started. Every setback is now bought immediately. This underlines the impressing performance during the last four weeks since the lows around US$1,155.90US$.

· Now Gold needs to move above the very important resistance around US$1,250.00-1,265.00US$. This of course will take some more time but should be possible during september. The upper Bollinger Band (US$1,243.06US$) offers enough room for prices to move up to at least US$1,250.00.

· The 50-dMA (US$1,210.35US$) will offer solid support in case of a setback. As well in this area resides the uptrendline. Therefore any correction should be limited down to US$1,210.00. The 200-dMA (US$1,158.31) instead is far away again from current price levels.

· The medium- and longterm picture is still very bullish. My next price target is the Fibonacci - Extension (261,8% of the last big correction) at US$1,600.00. This might be possible until end of this year or spring 2011.

· The DowJones/Gold Ratio is now at 8.32 points und changed in favor of gold again. A move in this ratio down below 8 points confirms the new rally in Gold and underlines the longterm move from paper assets to hard assets.

· Long term I expect the price of gold moving towards parity to the Dow Jones (=1:1). The next primary cyclical change is still years away. This means we are still in a long term bull market in gold (and also commodities) and in a secular bear market in stocks.

Gold in EUR (one ounce = 966€)

· Calculated in Euro Gold's performance since the lows is even more impressive. The spotmarket price is now 9% higher!

· After the steep sell off we are witnessing the typical bounce. This "feedback" rally could continue up to around 985,00€ - 1.000,00€ before a renewed decline should set in.

· Whether we get another buying opportunity under 900,00€ is now pretty unsure. Basically after such a parabolic move as €-Gold experienced it until june there is always a hefty sell-off. The following bounce from the lows is always steep and fast as well, but does not manage to get over the parabolic top. From here another decline follows that leads prices typically to a new low or a least to strong support.

· Therefore the typical test of the 200d-MA (863€) is still missing. But this can take some more time. The 200d-MA is moving up steadily and should be around 890-900€ in a couple of weeks.

· Every setback to around 900€ is now a clear and strong physical buy.

Goldbugs Index USD (468.37 points)

· The goldmining stocks were able to disconnect from the recent weak stockmarkets. The Gold Bugs Mining Index is now fighting with resistance around 470 points. A successful breakthrough will push this index to 500 points very fast.

· Around 500 points is already the very important and decisive resistance waiting. Arriving in this area for the fifth time the mining index should be able to finally break through after a small consolidation. If this indeed will happen sky is the limit for goldmining shares and we should witness an incredible firework until spring 2011.

Gold COT Data

· Parallel to stronger goldprices the commercials of course increased their shortpositions. The amount is similar to early july with the small however fine difference that gold was around US$30US$ lower at that time!

04/18/2009 = -153,419 ( PoG Low of the day = US$885 )
12/01/2009 = -308,231 ( PoG Low of the day = US$1,190 )
05/11/2010 = -282,644 ( PoG Low of the day = US$1,201 )
06/15/2010 = -278,944 ( PoG Low of the day = US$1,220 )
06/22/2010 = -288,916 ( PoG Low of the day = US$1,232 )
06/29/2010 = -289,956 ( PoG Low of the day = US$1,231 )
07/06/2010 = -249,142 ( PoG Low of the day = US$1,191 )
07/13/2010 = -248,348 ( PoG Low of the day = US$1,197 )
07/20/2010 = -215,664 ( PoG Low of the day = US$1,175 )
07/27/2010 = -227.555 ( PoG Low of the day = US$1,156 )
08/03/2010 = -222.029 (PoG Low of the day = US$1,180 )
08/10/2010 = -230.980 (PoG Low of the day = US$1,192 )
08/17/2010 = -249.570 (PoG Low of the day = US$1,223 )

Gold Seasonality

· We are approaching the strongest saisonal phase for gold. September is always a very positive month for precious metals.

Gold Sentiment

The sentiment has been calmed down due to the recent correction. The Put/Call Ratio has a lot more room to the upside.

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Conclusion

· Mid- and longterm term Gold should be on the way to my next price target around US$1,600.

· Inspite of negative stockmarkets Gold is moving higher. A push towards US$1,250.00US$ within the next 1-3 weeks seems to be very certain. Small and quick corrections down to US$1.210,00 are quite likely. The move above the alltime highs at US1,265.00 will however take some more time. If gold finally succeeds we will face a strong explosive fast and volatile rally to at least US$1,340.00.

· Alternatively gold is working on a head and shoulders pattern with the right shoulder in the area of 1.250US$ and a downside price target of around US$1,100.00.

However based on the strong development in recent weeks and the positive seasonality I consider this negative scenario to be very unlikely. Only a renewed strong deflationary crash could bring gold under pressure once again. Due to the fact that the agricultural sector is now moving up, inflationary tendencies should take over again. As well the Baltic Dry Index made a clear turn around in recent weeks.

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	Gold Spotprice Analysis Gold in USD (one ounce = US$1,227.70) · During the last two weeks Gold demonstrated enormous strength and easily conquered the resistance area around US$1,218.00-1,224.00US$. Gold climbed even higher to US$1,237.50US$. From here a small consolidation has started. Every setback is now bought immediately. This underlines the impressing performance during the last four weeks since the lows around US$1,155.90US$. · Now Gold needs to move above the very important resistance around US$1,250.00-1,265.00US$. This of course will take some more time but should be possible during september. The upper Bollinger Band (US$1,243.06US$) offers enough room for prices to move up to at least US$1,250.00. · The 50-dMA (US$1,210.35US$) will offer solid support in case of a setback. As well in this area resides the uptrendline. Therefore any correction should be limited down to US$1,210.00. The 200-dMA (US$1,158.31) instead is far away again from current price levels. · The medium- and longterm picture is still very bullish. My next price target is the Fibonacci - Extension (261,8% of the last big correction) at US$1,600.00. This might be possible until end of this year or spring 2011. · The DowJones/Gold Ratio is now at 8.32 points und changed in favor of gold again. A move in this ratio down below 8 points confirms the new rally in Gold and underlines the longterm move from paper assets to hard assets. · Long term I expect the price of gold moving towards parity to the Dow Jones (=1:1). The next primary cyclical change is still years away. This means we are still in a long term bull market in gold (and also commodities) and in a secular bear market in stocks. Gold in EUR (one ounce = 966€) · Calculated in Euro Gold's performance since the lows is even more impressive. The spotmarket price is now 9% higher! · After the steep sell off we are witnessing the typical bounce. This "feedback" rally could continue up to around 985,00€ - 1.000,00€ before a renewed decline should set in. · Whether we get another buying opportunity under 900,00€ is now pretty unsure. Basically after such a parabolic move as €-Gold experienced it until june there is always a hefty sell-off. The following bounce from the lows is always steep and fast as well, but does not manage to get over the parabolic top. From here another decline follows that leads prices typically to a new low or a least to strong support. · Therefore the typical test of the 200d-MA (863€) is still missing. But this can take some more time. The 200d-MA is moving up steadily and should be around 890-900€ in a couple of weeks. · Every setback to around 900€ is now a clear and strong physical buy. Goldbugs Index USD (468.37 points) · The goldmining stocks were able to disconnect from the recent weak stockmarkets. The Gold Bugs Mining Index is now fighting with resistance around 470 points. A successful breakthrough will push this index to 500 points very fast. · Around 500 points is already the very important and decisive resistance waiting. Arriving in this area for the fifth time the mining index should be able to finally break through after a small consolidation. If this indeed will happen sky is the limit for goldmining shares and we should witness an incredible firework until spring 2011. Gold COT Data · Parallel to stronger goldprices the commercials of course increased their shortpositions. The amount is similar to early july with the small however fine difference that gold was around US$30US$ lower at that time! 04/18/2009 = -153,419 ( PoG Low of the day = US$885 ) 12/01/2009 = -308,231 ( PoG Low of the day = US$1,190 ) 05/11/2010 = -282,644 ( PoG Low of the day = US$1,201 ) 06/15/2010 = -278,944 ( PoG Low of the day = US$1,220 ) 06/22/2010 = -288,916 ( PoG Low of the day = US$1,232 ) 06/29/2010 = -289,956 ( PoG Low of the day = US$1,231 ) 07/06/2010 = -249,142 ( PoG Low of the day = US$1,191 ) 07/13/2010 = -248,348 ( PoG Low of the day = US$1,197 ) 07/20/2010 = -215,664 ( PoG Low of the day = US$1,175 ) 07/27/2010 = -227.555 ( PoG Low of the day = US$1,156 ) 08/03/2010 = -222.029 (PoG Low of the day = US$1,180 ) 08/10/2010 = -230.980 (PoG Low of the day = US$1,192 ) 08/17/2010 = -249.570 (PoG Low of the day = US$1,223 ) Gold Seasonality · We are approaching the strongest saisonal phase for gold. September is always a very positive month for precious metals. Gold Sentiment The sentiment has been calmed down due to the recent correction. The Put/Call Ratio has a lot more room to the upside. Conclusion · Mid- and longterm term Gold should be on the way to my next price target around US$1,600. · Inspite of negative stockmarkets Gold is moving higher. A push towards US$1,250.00US$ within the next 1-3 weeks seems to be very certain. Small and quick corrections down to US$1.210,00 are quite likely. The move above the alltime highs at US1,265.00 will however take some more time. If gold finally succeeds we will face a strong explosive fast and volatile rally to at least US$1,340.00. · Alternatively gold is working on a head and shoulders pattern with the right shoulder in the area of 1.250US$ and a downside price target of around US$1,100.00. However based on the strong development in recent weeks and the positive seasonality I consider this negative scenario to be very unlikely. Only a renewed strong deflationary crash could bring gold under pressure once again. Due to the fact that the agricultural sector is now moving up, inflationary tendencies should take over again. As well the Baltic Dry Index made a clear turn around in recent weeks.