Signs of a Bottom in Gold and Gld Stock?

With gold correcting back roughly 16% from its recent all-time highs it sometimes pays to put things in a little perspective.

This is a weekly chart of gold dating back to the start of the bull market in 2001. As can be seen gold has been in a relentless uptrend since its double bottom lows near $250 in 2001. Based on the current price that is a gain of 540%. Gold is up about 460% since the beginning of the millennium. Compare that with the S&P TSX Composite that is up 33% and the S&P 500 who is down some 23% since the beginning of the millennium.

As this chart shows gold has also had numerous corrections over the past 11 years. Many of them have been quite sharp. However, a couple of things stand out. First gold tends to find significant support at or near the 40 week MA. Second gold appears to find good support when the weekly RSI falls to around the 50 level. All of these points have been marked with an X.

There has been an exception. The 2008 financial collapse took Gold well below the 40 week MA and the RSI fell significantly under 50. As TC has noted in the past gold follows what appears to be a 8.5 year cycle with a range of 7 to 11 years. Based on the 2001 low that low was due August 2009 + or – 17 months. The low of October 2008 fell in that period suggesting that was the 8.5 year cycle low. Confirmation came when gold took out the highs of March 2008 going from $1000 to $1900. As TC has suggested this current correction is probably the 34 month cycle (subdivision of the 8.5 year cycle by a factor of 3) low that is due July 2011 + or – 3 months.

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via Signs of a Bottom in Gold and Gld Stock?.

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