Gold is set to rise further; could reach $1,190 or $1,300 in March or May

Outlook for NY gold — Gold breached last autumn’s rebound high of $909 (2008/9/22), making it virtually certain that a new rising leg from $705 (2008/11/13) is under way, in our view. The focus moving forward will be on whether gold stays on its upward trajectory and penetrates resistance at $933. We think a push through $933 would increase the likelihood of gold renewing last spring’s all-time high at an early stage and rising to $1,190 or $1,300 in March or May.

Into new upward phase — Gold peaked last spring at $1,004 (2008/3/18) and entered a correctional phase, but it did not correct as much as crude oil or non-ferrous metals and bottomed at $705 (2008/11/13). After that, it broke out of the bear flag pattern it had traced since last summer and rose further to breach last autumn’s rebound high of $909 (2008/9/22), virtually assuring that a new rising wave is in progress.

Near-term resistance at $933 — As we said in our last issue of “Next Wave”, this coming March (return of 158- and 59-month cycles) and May (98-month cycle) are important months from the standpoint of time cycle analysis. In the meantime, we think attention is going to focus on whether gold breaches near- term resistance at $933 at an early stage.

Scenario (1) — If gold breaks above $933 and appreciates further to breach $986, we think it will likely surpass last spring’s high of $1,004 (2008/3/8). If this happens, it could ultimately rise to $1,190 or $1,300.

Scenario (2) — If gold peaks at $933, it would be vulnerable to a pullback, but we see the correction playing out after a drop of about $77 or $128. In this case, gold would be more likely to struggle for direction until around March and then break out of the holding pattern held since last spring, rising to $1,190 or $1,300 in May or thereafter.

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