Sand Spring Advisors LLC
Yen-Gold: Nearing Long-Standing Fibonacci Target
February 6, 2002
by, Barclay T. Leib
There has been little that we have been more bullish on since the inception of Sandspring.com in December 1999 than the gold price denominated in yen.
And with Tuesday's $9 rally in gold blowing away the $289 resistance level, perhaps we should be heralding a new day for the gold market.
But as happy as we are to see gold back from the dead, we also try to keep our emotions in check. Too many gold stocks are too far ahead of the metal -- indicative of speculative buying rather than underlying physical gold demand -- with stocks like Anglogold fast appraching a band of resistance between $23.90 and $25.35. Technically we think that on the way to potentially greater things longer term, gold is likely to run out of gas in the short term near $304-305. In terms of gold denominated in yen (with yen near 134.25), this should see gold touch our long-standing Fibonacci taget at 40,811 yen. After that, it will be due for a pause.
Perhaps we will regret not yelling and screaming to buy more gold on Tuesday's "breakout." Perhaps after so many years of living through a bear market in gold, we simply have a Pavlonian response to book profits on winning long positions when they become substantive -- and before they disappear. But whatever the case, and for better or for worse, as the yellow metal finally captures the public's attention, we are now in "take-profit" mode. A high in gold here in February (might our Feb 19th PEI cycle date hold some significance here?) can easily yield to retracement or range building in gold into the seasonally soft June period, before another shot up to $340-$350 by November. That's at least our idealized intermediate-term rhythm.
For now yen-gold is saying a 51.5% rally since the September 1999 lows is enough. Say thank you and go to the bank.
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