Gold is in the process of pulling back substantially from its recent all-time high, but it appears very unlikely that the bull market has ended. The current decline is thus far the third-largest of the ten-year uptrend, in percentage terms, having narrowly exceeded 20%. The weekly logarithmic chart makes clear that the upward thrust which began at 1478.30 on July 1, and which preceded the current pullback, was much smaller than the sharp rallies which came before the two larger corrections of 2006 and 2008. One implication of this fact is that gold has not passed through the kind of blow-off top that is likely to bring the bull market to an end. Another possible implication is that the downside from here is limited. The most prominent bearish pattern begins at 1819.40, and the BC retracement is already more than half of the impulse wave, putting the midpoint exactly two dollars above the 1535.00 low, which serves as our “B” point. As such, we might see a re-test of that low, and we might expect it to survive. If it doesn’t, the “D” target of 1394.80 will come into view. The eventual low of this pullback will become the “C” point of a large pattern which must be reckoned to begin at 681.00 three years ago. As things stand, this large but still tentative pattern targets a high at the memorable level of 2777.70. (Posted by Doug “harry” McLagan)
