Big movements take time to develop... Men who can both be right and sit tight are uncommon. - Jesse LivermoreIf you look at a long term chart of gold, you'll see it's forming a giant "wedge" formation:
Saturday, March 2, 2013
You can see the price of gold "basing" in the $1525 - 1550 area. We know based on the huge import premiums vs. the world spot price in India, China, Indonesia, Viet Nam and other Asian countries, that the big physical buying countries are aggressively buying gold on every price dip. This is physical gold that is removed from the global trading supply and disappears into Central Bank and private vaults.
At some point, the paper trading markets in NY and London will not be able to contain the free market forces of supply and demand. In this country, February was a record sales month for U.S. Mint silver eagles.
I wrote an article for Seeking Alpha which discusses a very important technical indicator that has always worked in periods of "extreme" highs and lows. You can read about that and another indicator that is signalling that this current price correction is nearly over: Patience Will Be Rewarded
Finally, downward "wedge" formations like the one above almost always "resolve" with a big move to the upside. Typically, the size and duration of the move higher is proportionate to the length of the base of the wedge.
Posted by Dave in Denver at 9:22 AM