A Closer Look at Developing Gold Price Bottom

By: Jesse

"The banks have essentially been told by the Federal Reserve they're allowed a certain number of sins. Just not as many as there used to be." Brad Hintz, Sanford and Bernstein

Here is a closer look at the gold bottom that everyone and their brother was rushing to call last week, so they could claim prescience.

As I have said repeatedly the last several weeks, every time that the COMEX dealer inventory has fallen to record lows, it has market an intermediate trend change that proved to be significant.

And for the first time in this waterfall decline since the German people had the temerity to ask for their gold back from the NY Fed, we see a legitimate chart formation that could mark a significant bottom in price.

Note the 'slanting W' which is a term I coined some years ago for a certain type of bottom in a price decline. The most important feature was the successful retest of support at 1280, and the subsequent breakout above the top of the W today.

We could see a retest of support or two, and there is the more difficult resistance to be encountered from 1340 to 1360, which also includes gold's 50 day moving average. This is an area of prior support where a potential double bottom failed in the face of a relentless paper selling attack some time ago. I suspect that while it achieved it's purpose, it was 'a bridge too far.'

To put it simply, taking gold below 1300 was a terrible strategic error done with nothing but short term greed in mind. Some times there is no greater punishment than when the powerful get their own way. They tend to do foolish things like go to a protracted winter war without arranging for adequate supplies.

The measuring objective of this particular chart formation is about 1450 or so. There will be additional macro formations to look at on the chart which we will discuss as they develop more.

Of paramount importance is the physical supply. The damage done to the real market for gold by this paper exercise should not be underestimated. There are great things occurring in quiet in the global markets.

By Jesse

http://jessescrossroadscafe.blogspot.com

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