Jim Sinclair’s Commentary
Is gold heading to $4,500?
Commentary: Are gold fundamentals, technicals most bullish ever?
By Peter Brimelow, MarketWatch
Aug. 23, 2012, 2:04 a.m. EDT
NEW YORK (MarketWatch) — Gold makes its move. The bugs are rampant.
The yellow metal made life very difficult for commentators trying to keep a regular schedule on Wednesday.
MarketWatch’s Claudia Assis can hardly have hit the send button on her story headed “Gold ends lower as other metals gain”, which dealt with the close of floor trading — the December gold contract was down $2.40 — when the Fed minutes set the market roaring.
By the stock market close, gold had risen over $17 to stand 1% above Tuesday’s stock market closing level and at the highest since early May.
Gold shares, too, came surging out of negative territory to finish with strong gains. The NYSE Arca Gold Bigs Index (XX:HUI) closed up 2.21%, the highest since June 19 and up 17.2% since the recent low on July 24.
This late development followed a strong day on Tuesday, which saw a floor close in the CME December contract of up $19.90 (1.23%) and a 1.69% gain in the HUI.
This was enough to stimulate exuberant commentary by the Aden Forecast’s GCRU service, published early Wednesday morning: “AND….. THEY’RE OFF! The markets have taken off. The train has left the station, and another leg up in the bull market is getting started.”
“Whether it be gold shares on their own, compared to gold, versus bonds or versus the stock market, gold shares are rising from the dead.”
GCRU had a particularly kind world for silver: “Silver broke above its 75-day [moving average] for the first time in four months, showing impressive strength! Silver’s rise is the strongest it’s been since the rise earlier this year.”
GCRU’s prognostication: “Silver must break above $30 to confirm strength that could push it to the February highs near $37.”
The silver situation is exciting particular interest. Letter editors have noted that the metal had been achieving technical objectives earlier than gold during this move.
Furthermore, according to Bill Murphy at the LeMetropoleCafe website, rumors of large silver purchases in London have been followed by stories of delivery problems being experienced by London Bullion Market Association members.
Stories of this type, unfounded or not, could have an explosive effect on the thin silver market.
The gold action caught the attention of market veteran Richard (Dow Theory Letters) Russell.
Using a point and figure chart with a 2:30 p.m. Eastern Time cut-off, he noted: “Gold may finally be on its way to higher levels. Gold has risen to fill the $1,640 box, which is constructive. The next bullish action would be a rally to the $1,650 box. This would take gold clear out and above its consolidation base, and would put it in line to try for $1,680.” (By 4 p.m., gold had cleared $1,650).
Russell concluded his Wednesday evening note: “If gold takes off, the gold miners will look dirt cheap.”
The Got Gold Report last weekend quantified an expectation about the HUI: “A print above 445 would be very convincing to skeptics and set up a test of the 40-weekly moving average currently near 474.”
Wednesday’s close was 454.44.
And further? The Golden Truth website, reportedly written by a gold-market professional, says on Wednesday after a detailed chart discussion: “From both a fundamental and technical standpoint, the indicators for gold to make a run to new highs have not been this bullish in the 11-year bull market.”
At JSMineset, ultra-experienced old gold hand Jim Sinclair confines himself to republishing an Aug. 1 essay from technician Alf Fields: “The bottom line is that we now have a really strong probability that the correction which started at $1,913 on Aug. 23, 2011, has been completed both in terms of Elliott waves and also in terms of time elapsed.”
“If this is correct, the gold price should soon be expressing itself in violent upside action as it moves into the third of third wave, which is still targeted to reach $4,500.”