Gold: We Have Lift-Off !

Elliott Wave Gold Update XV

In Gold market we finally have "Ignition" and "Lift-off". Events over the past three weeks have created a situation where an upside price catapult of at least $100 per ounce, without a significant correction, can be anticipated.

It appears that the long 14 month correction since May 2006 has come to an end and the much anticipated strong "third of a third" up wave has started. This forecast can now be given a high probability of success.

Data updated to 9 July 2007.

There are a couple of reasons for this confidence. Firstly the two downward waves in the most recent correction have turned out to be identical in terms of percentage decline, literally to the decimal point. This strongly suggests that these two declines are part of the same larger correction, which is what had been anticipated in Update XIV. Secondly the recent downtrend was decisively broken yesterday, 9 July 2007, indicating that the correction is over.

The following are the details of the 2 down-waves in the smaller irregular a-b-c correction reflected in the above chart of the London PM fixings:

This is uncanny and very exciting when combined with the strange shape of the complete wave 2 correction. Wave 2 is an extremely rare Irregular A-B-C correction with a skewed upward bias. As explained in an earlier newsletter, this formation occurs because of the very strong bullish forces underlying the market which cause the upward bias. When the corrective forces eventually abate, the underlying strength catapults the market upwards in a rarely witnessed rapid upward move that exceeds almost everyone's expectations. That is what is anticipated in the forthcoming weeks as the strong wave 3 of wave THREE unfolds.

Initial evidence that the gold rocket has cleared the gantry will be when a PM fixing above the recent high point of $691.4 is achieved. Assuming that the gold market is now in the grip of the strong "third of third" wave, it should have no difficulty powering through the erstwhile resistance in the $680 to $700 range.

The 2 Month Forward Comex Gold chart depicts a similar situation:

Data updated to 9 July 2007.

This chart shows the dramatic breakaway gap above the red down trend line, implying that the correction is over and that the new upward wave 3 has commenced. The percentage declines in the a and c down-waves within wave C of wave 2 are also almost exactly equal, as reflected in these figures:

While not precisely equal as in the PM fixings, a single decimal point difference does not detract from the observation that these two down waves are of equal magnitude and thus part of the same corrective wave. This confirms the conclusion drawn from the PM fixings.

The same bullish conclusions mentioned as a result of the PM fixings analysis can be drawn for the Comex 2 Month Forward Gold chart. It appears that wave 3 of wave THREE has commenced and it should be a whopper. Perhaps, more precisely, the wave underway is wave i of wave 3 of wave THREE.

While the immediate bullish forecast can now be assigned a high probability of being proved correct, it is necessary to have some guidelines in case things unexpectedly go pear shaped and don't work out as forecast.

There are two levels that would be of concern if breached on the downside.

Firstly the recent lows at $642.1 for London PM fixings and $642.7 for Comex Gold 2 month forward prices should not be breached on the downside. Prices below these levels would destroy the symmetry of the two down-waves being exactly equal and would cause a cautionary light to start flashing.

Secondly, a breach of $630 on the downside would indicate that more corrective action is possible. In that case a new wave count and forecast will have to be considered.

Alf Field

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Disclosure and Disclaimer Statement: In the interest of full disclosure, the author advises that he is not a disinterested party in that he has personal investments in base metal mining shares including Zinifex and Mincor ment. The author's objective in writing this article is to interest potential investors in this subject to the point where they are encouraged to conduct their own further diligent research. Neither the information nor the opinions expressed should be construed as a solicitation to buy or sell any stock, currency or commodity. Investors are recommended to obtain the advice of a qualified investment advisor before entering into any transactions. The author has neither been paid nor received any other inducement to write this article.