Exploring the Trading Range Limits for Spot Gold Q1 2014

The rally is on. The onlookers now agree that it is on. Buy orders are flowing into gold. For myself, having done a lot of buying in April, July and Dec 2013, I must say that am getting nervous. I don't want to be in a company of late bulls!

But nervous is OK. "Climbing a wall of worry" has always been a good phrase to describe a rally which may continue still more.

So I thought it might be a good idea to explore the technical limits which may eventually contain the price of gold for the first quarter of 2014.

First a weekly chart:

I have numbered the 5 highs at the end of 2013 as # 1 to #5. These provide me with three good trendlines which move down and forwards into Q 1 2014.

The first, lowermost, red declining trend was broken at the place marked A. Then gold moved fast up to the second blue middle declining trend and broke it at point B. This appears to set gold up for a rally to challenge the third upper red declining trend, which it might meet somewhere about the projected point "C". But what price, or how high might C be located?

So let's move to the next chart:

Here (above) I have added a trendline to highlight the presence of a higher low in gold from mid 2013 to end of 2013. Is this information of any value? Let's move to the next chart:

Here (above) I have made a parallel on the slightly rising trend and made an attempt to guess where the top of gold's trading range might presently be. I placed the new slightly rising blue line off the half yearly high last August, and it seems to suggest that 1450 might be conceivably possible! It also suggests that the next declining red trendline not yet reached by gold could fall to this rally. That would be nice. Let's move on:

Now I have added two more parallel versions of that slightly rising trend, to try to find where the 1/3rd and 2/3rd parts of the present trading range might be located. I placed them off the last downswing monthly highs and lows. This is beginning to get interesting. Notice how gold laboured to get through the lower blue line just above 1250, zigzagging for 4 weeks. But once it had gotten through that stickyness it was free and accellerated up towards the higher blue 2/3rds line above 1350. It's not arrived yet. This is a likely area where the bears will try to sell gold down again. But they are being pushed back upwards so far.

Let's move to the final chart. This not a forecast, but it is a hypothesis. A possible scenario which could well play:

This is one way in which the current rally in gold can hit all the levels, and respect them, before turning to find where the new trading range base will be located after this rally is "on the charts". Like I said, not a forecast. it's too elaborate to be a forecast. But if spot gold looks sort of reminiscent to this at the end of Q1 2014, I wouldn't be all that much surprised.

Argentus Maximus

The author posts daily commentary on the gold and silver markets in the TFMR forum: The Setup For The Big Trade. More information about the author & his work can be found here: RhythmNPrice.

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