Monday, 12 May 2008

Fractal gold guy nailed it at $852! 2008-05-12.

Monday 12th May 2008: 5:48 p.m. : Fractal gold guy nailed it!

In my previous post on 26 March (Major gold top predicted (link). 2008-03-26), I mentioned the article by David Nichols of the Fractal Gold Report thus:

"Wednesday 26th March 2008. Back to $950.The gold price is back up at $950 today, but David Nichols has an article on Kitco called 'Gold in Free Fall' asserting that the $1000+ top was a 'major, multi-month top' and there will be further falls, after a bounce to about $966. The next few days will test his prediction!"

He also stated, "I recommend using the coming bounce up to $966 as the last chance to get out before the next free-fall. The bigger downside targets for this correction are at least $850, with a good chance that the selling will feed on itself and push gold all the way down to $730."

Interesting predictions, from a FRACTAL point of view. I thought it was worth following his ideas and seeing where they led.

In a later commentary, called Fractal Gold Report: Slingshot Levels, he mentioned a possible gold bounce to $910 as a good shorting opportunity before another leg down, with a target of $852. This forecast was on April 23rd and consistent with what he said a month earlier. Since then, although the initial bounce in gold was weaker and didn't manage to hit 910, the price headed right to his target of $852.

Don't be fooled by his prediction of this major pullback: this guy is bullish on gold, comparing it on his website to the Nasdaq in the 1990s, saying, "Gold is the most exciting speculative opportunity of the next 10 years."

A quick look at the stock Gallery Gold View page at$GOLD shows that gold bottomed at an intraday low of $846.40 but a visual inspection shows the closing price low to be very close to $850. Kitco's Historical London Fixings give the minimum London price as $850.50 in the afternoon of 2nd May. Conclusion: This guy was close!

So I am certinly planning to watch what he says in the future and see if the next moves he forecasts come to pass. He is looking at $852 as the bottom for now, especially since it was originally the level that was originally the launchpad for the quick move to $1000+ earlier this year. See his latest article: Gold - Nothing Random About It from 8th May.

(For a similar view from another perspective, see The Correction's End by Roy Martens on Kitco, dated, May 8 2008 8:49 a.m.)

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