Update 22nd october 2012

1. Personal Note

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2. Update

Arguments for lower prices:

• 3rd attempt (within 11 months) to take out heavy resistance around US$1,790.00-1,800.00 failed and Gold clearly broke down from bearish wedge
• Gold weekly embedded slow stochastic reading now lost (could be regained again only within this week if Gold manages to create a bounce from oversold levels. Otherwise it will take more than a month to get embedded readings again despite any price action. In this case indicator will become overbought on the weekly chart, this would imply lower prices or sideways action in gold in the coming weeks ...)
• Silver's slow stochastic close to embedding (both lines below 20) on the downside in the daily chart
• Short-term recovery after Friday's sell off so far very muted
• COT Data still very bearish despite some little short-covering from the commercials
• Gold stocks did not yet reach 38,2% and 50MA
• Despite dollar weakness gold & silver performed very weak
• October historically worst month for gold (Gold usually hits a low just as the Hindu festival of lights "Diwali" starts which is 13th of November this year)
• VIX after three months of sideways action now trying to move up from long-term lows. Higher volatility normally means correction in the stock market (Google & Apple already down sharply).

Arguments for higher prices:

• Gold & silver now oversold
• 50-MA (US$1,720.02) offers support
• 38,2% (US$1,719.40) offers support
• Short-term momentum Indicators (1h chart) did not confirm lower lows (bullish divergence)
• Gold stocks outperforming gold last week
• Monthly Bollinger Band offers more room to the upside. Currently US$1,837.48
• New uptrend in precious metals since august 2012 that should carry gold up to US$1,880.00-1,920.00 until spring 2013.
• November very bullish seasonals. Seasonality until spring very promising.
• Never fight the FED. Unlimited QE -> money printing all over the world will push asset prices in all sectors higher...
• FED might want to keep the markets up until presidential election

Conclusion:

• Gold reached 1st strong support around US$1,720.00 and is statistically "moderate oversold". A brief bounce up to around US$1.745,00 (downtrend channel) followed by sideways action around 50MA (US$1,720.02) in the next couple of days should be expected.
• So far recovery has been very muted and judging from past experience this is not the type of final sell off that often ends a correction in gold.
• Since COT Data still looks pretty bad I expect the correction to be continued. Downside target will be 200-MA (US$1,662.39) and 61,8% retracement of the recent rally (US$1,670.78).
• After this correction I expect year-end rally to start sometime within the first two weeks of November

Long-term:

• Nothing has changed
• Precious Metals bull market continues and is moving step by step closer to the final parabolic phase (could start in 2013 & last for 2-3 years or maybe later)
• Price target DowJones/Gold Ratio ca. 1:1
• Price target Gold/Silver Ratio ca. 10:1