Janet & Gold: Does History Rhyme?

Good things come to those who wait, because patience is a virtue.

Over the past few days, various Fed presidents and governors have made both hawkish and dovish statements. The US stock market and gold stocks have reacted violently to these statements. 

It’s important for all gold stock investors to understand that anything can happen at next week’s critically important FOMC and BOJ meetings.

Ahead of those meetings, it’s clearly a time for patience. Once the meetings have been completed, institutional investors will begin to apply large amounts of liquidity to the markets, and a new intermediate trend will be underway.

I annotated this chart a week ago, predicting a rally to the trend line in the $1355 area, and then a pullback from there to $1325. 

Gold followed the exact trajectory I predicted.

All that’s left now is for gold to stage an upside breakout from the drifting rectangle pattern, and begin the rally to my $1392 and $1432 target zones.

That is unlikely to occur until next week’s FOMC/BOJ meetings are completed.

Many technicians have noticed this bull wedge pattern, and they are predicting a kind of parabolic move to begin after an upside breakout. 

While that sounds wonderful, these technicians may be quite disappointed by what actually transpires if there is a “breakout”.

Upon close inspection, it’s clear that gold could rise to $1432 over the next quarter, and still be contained within the bull wedge pattern on the quarterly bars chart.

Also, there is massive overhead resistance in the $1492 – $1523 price zone. Gold is extremely well supported by value-oriented institutional money managers, but most of the price appreciation is coming from the low relative cost of carry that gold is showcasing against major fiat currencies.