Greg Guenthner

Since Obama entered office 2008, gold has been on an unbelievable tear. But will the momentum continue during the president’s second term?

Let’s zoom out and see:

Over the last five years, gold’s spot price has only two spots where it lost significant momentum. Once was during the 2008 financial crisis (where the term “sell everything” took on a whole new meaning) and once again earlier this year.

Still, I wouldn’t put gold’s 2012 action in the same category as 2008. It’s sideways movement—nothing more. Also, I wouldn’t put too much stock into the presidential elections and the price of gold—other than the fact that we now know that there will more than likely be no changes to monetary policy anytime soon. Of course, that bodes well for gold bulls.

Gold’s Next Spike Could be Right Around the Corner

Gold has outperformed the S&P 500 over the past three-plus years. But gold and stocks have essentially traded in the same direction over this same timeframe, with the exception of the late 2011 correction:

The arrows on the left side of the chart mark where stocks and gold diverged. You probably remember this gold rally coincided with a nasty drop in stocks fueled by the eurozone crisis and the U.S. Congress’ ill-advised debt ceiling bluff. Both these events spooked investors enough to shoot gold to new highs.

As the crisis became old news, the relationship between gold and stocks returned to “normal” for the time being. My original thinking was that if gold and stocks’ relationship remains intact, the yellow metal could correct with the stock market. But as the calendar flipped to November, you can see the S&P and gold beginning to diverge once again—a potentially ominous sign for stocks, an a catalyst that could set up a gold rush like we saw in 2011.

Two words could help send gold significantly higher: fiscal cliff.

If investors continue to fret about the looming fiscal cliff and all of the surrounding media attention, it’s entirely possible for gold to put in a repeat performance similar to its 2011 spike.

When to Buy Gold—and What to Expect

If you’re a holder of physical gold, you probably aren’t interested in stop-losses—or any talk about selling your holdings, for that matter. That’s fine. Instead, I want to reveal a gold roadmap that will show you what you can expect from the yellow metal over the long-haul:

The two blue lines tell the story here. Gold is trading in a range between $1,550 and $1,800. These levels are both important psychological price points. Here’s how you can plan your purchases:

First if gold drops below $1,550, hold off on buying for several weeks and/or months. A break of $1,550 signals that lower prices are in gold’s future. If you’re able to wait, you could easily get a better deal—perhaps prices between $1,300-$1,400.

On the flip side, a breakout about $1,800 would signal that higher prices are in store in the near future—possibly even another attempt at $2,000.

With congressional fireworks set for the halls of the capitol in the next few weeks – and more talk of the looming fiscal cliff – I’d err on the upside of the estimates above.

Sincerely,
Greg Guenthner, CMT

Original article posted on Daily Resource Hunter

Greg Guenthner

Greg Guenthner, CMT, is the managing editor of The Rude Awakening. Greg is a member of the Market Technicians Association and holds the Chartered Market Technician designation.

Recent Articles

5 Min. Forecast
How the Swiss Could Set Off a Financial Avalanche

Dave Gonigam

There have been quite a few disappointing numbers in the global economy recently. But as these numbers are just economic "snowflakes" building toward a financial avalanche. All you need is one to push it over the edge. And as Dave Gonigam explains, the deciding snowflake may come from Switzerland. Read on...


Addison Wiggin
One World, One Bank, One Currency

Addison Wiggin

After the 2008 financial crisis, little could be heard over the deafening cries of "mission accomplished." And while the Fed's massive QE program seemed to work, the question remains: for how long? Addison Wiggin explains why the next round of QE will fail miserably, paving the way for the IMF to step in with something called "special drawing rights." Read on...


Addison Wiggin
Profit from Global Warming, Even if You Don’t Believe In It

Addison Wiggin

Global warming is one of the most debated subjects of the last few years. But regardless of whether you're a "true believer" or a merely an unconvinced skeptic, there are significant ways to make serious money from this controversial topic. Today, Addison Wiggin brings you three of them. Read on...


Don’t Drink the Tap Water (It’s Not What You Think)

Chris Campbell

Under the auspices of benefiting public health, the government has been administering medication to you and your family for generations. But is it really necessary? Or worse... Could it actually be harmful? Chris Campbell takes a closer look at this, and other personal health decisions the feds don't trust you to make...


One Metal to Watch in the Current Commodity Crash

Greg Guenthner

Commodities have been in freefall lately. Everything from corn to soy beans to precious metals is headed lower right now. But is this just a brief downturn, or is this the beginning of a long-term trend? Greg Guenthner explains, with a closer look at one specific precious metal that could snap back violently before heading lower. Read on...


Extra!
What to Hold When the U.S. Economic Blimp Deflates

Jim Mosquera

The inflation vs. deflation debate is a heated one. Heck, it almost brought Peter Schiff and Harry Dent to blows. But at the core of this debate is a common misunderstanding of the nature of both inflation and deflation. Today, Jim Mosquera seeks to explain each... and which one the U.S. is more likely to experience. Read on...