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This first daily chart examines the gold secular bull market beginning in late 2001, with emphasis on the relationship between C wave tops and the underlying 200 day moving average, and provides some guesstimates for just how high gold will fly in the months ahead.  In brief, I am thinking that gold could reach as high as $1,600 in the next 5 weeks and $2,000+ before this C wave has concluded next late Spring.

 

I am indebted to Toby Connor of Gold Scents and Gary Savage for much of my analysis.

 

There are various techniques for guesstimating the height which the parabolic C wave of gold‘s repetitive ABCD wave pattern will rise.  One of the standard approaches is illustrated here and is simply the percentage price is able to rise above the 200 day moving average, before plummeting back towards earth.  

A couple of things about the ABCD pattern.  Notice how each successive pattern has become generally larger, longer and more capable of propelling price higher above the 200 dma.  And, of course, notice that each C wave concludes with a parabolic advance.

(For a detailed look at gold‘s repetitive ABCD pattern, examine the chart here).

It is thought that the current C wave will transpire over 3 stages or phases.  

Phase 1 concluded this past December 2009 at the time of the US Dollar yearly cycle low and at a price of $1227 – 25.3% above the 200 dma.

Phase 2 of the current C wave appears to be entering its final right translated daily cycle which could propel gold price to $1600 – some 30% above the 200 dma.  At the time of this writing, gold is only 10% above the 200 dma, so we are talking about quite a move and quickly throughout the month of November.

Phase 3 is thought to coincide with the major 3 year cycle low of the US Dollar expected in the late spring of 2011.  A rise above the 200 dma of approximately 50% would be a truly parabolic climax to this, the largest and most massive C wave to date – and yield a top somewhere around $2,000+.
  

Silver is currently 32% above its 200 dma.  If we assign a percentage consistent with previous parabolics, say 60%, silver could easily reach $32 by the end of November.  Silver closed last Friday just below $25.

INVESTMENT STRATEGY:  I have done well using the TSI to trade short term surges in the momentum of mining stocks.  However, I do not anticipate this strategy to be particularly advantageous during a parabolic rise in gold and silver.  Rather, a buy and hold strategy would probably work the best and once I have my portfolio set I will resist ‘overtrading’ for the next several weeks.  

Some ETFs that I will now consider purchasing:  Global X Silver Miners ETF (NYSE:SIL), ProShares Ultra Silver ETF (NYSE:AGQ), and the Market Vectors Junior Gold Miners ETF (NYSE:GDXJ).  Their charts are presented individually below.